@Munich Re.
In its latest financial results announcement, German reinsurance giant Munich Re said it has “[posted a] net result of €1.1 billion in Q1 despite high major-loss expenditure”. This compared to €2.1 billion in the same period last year.
In its press release, it said its combined ratios were above target values for property-casualty reinsurance – at 83.9% – and for Global Specialty Insurance, they sat at 95.5%, “due to LA wildfires”.
“Although Munich Re did not emerge unscathed from the devastating wildfires in Los Angeles in January 2025, we nevertheless managed to generate a quarterly profit of €1.1 billion,” said Christoph Jurecka, Chief Financial Officer at Munich Re.
"We’re sticking with our profit guidance of €6 billion for the 2025 financial year – thanks to favourable market conditions and the quality of our portfolio.”
The losses could highlight future problems for reinsurers with increasing numbers of natural catastrophes around the world.
“This exemplifies the Munich Re Group’s resilience, boosted once again by the prudent management of our business portfolio,” he said. “For example, the contributions to the net result from life reinsurance and from ERGO (the group’s primary insurance arm) partially offset the higher combined ratios for property-casualty reinsurance and Global Specialty Insurance. We’re sticking with our profit guidance of €6 billion for the 2025 financial year – thanks in no small part to ongoing favourable market conditions and the quality of our portfolio.”
The specificity of the reasoning is not too surprising considering the reverberations of the LA wildfires from January. In March, Fitch Ratings said Europe’s big four reinsurers had had a successful 2024, which, in turn, had set them up to weather the shocks and volatility of 2025 better than previously thought.
However, the LA wildfires caused headaches for re/insurers with huge losses. In February, the consequences of the fires gave markets some jitters, with predictions that the huge bill could have an effect on investments for insurers.
US insurers have also pressed the LA wildfires as part of their reasons for less-than-stellar, though often still increasing, results. Chubb recorded a $1.47 billion bill from the wildfires.
Elsewhere, Travelers said they managed to turn a profit despite the fires, which are thought to be one of the most costly natural disasters ever.
“We are pleased to report a substantial profit for the quarter despite the devastating January California wildfires,” said Alan Schnitzer, Chairman and Chief Executive Officer of Travelers, in the press release on their Q1 results. “We earned core income of $443 million, as outstanding underlying results, strong net favourable prior year reserve development and higher investment income more than offset catastrophe losses.”
For Munich Re, this could be particularly galling, as it released its summary of natural catastrophes in 2024 in January, which said the nat cat balance sheet in 2024 was “a loss-heavy year for insurers” and warned for more to be done to mitigate climate change.
There were insured losses of $140 billion, which only two years since 1980, have been more expensive than so far.
The growing nat cat loss burden could see more in the re/insurance sector assess their risk and exposure, which could affect their investment strategies.
Its results said that in Q1 2025, Munich Re generated a net result of €1.09 billion compared to €2.11 billion in the same period last year.
Insurance revenue from insurance contracts issued rose to €15.8 billion compared to €15 billion in Q1 2024.
The total technical result fell to €2 billion, which was primarily attributable to high major-loss expenditure in reinsurance.
Equity was slightly higher at the reporting date – €33.3 billion – than at the start of the year, which stood at €32.9 billion.
In detail, the statement said that ERGO Germany generated a result of €140 million compared to €161 million in Q1 2024; “the minor decline was attributable to a lower investment result,” it said.
“Negative fair value changes of fixed-interest securities were the main reason behind the lower investment result compared with Q1 2024."
The investment result decreased to €1.32 billion – €2.16 billion in Q1 2024 – in Q1, while regular income from investments increased to €2.09 billion from €1.8 billion, owing in part to sustained high interest rates.
“Negative fair value changes of fixed-interest securities were the main reason behind the lower investment result compared with Q1 2024,” it said. “Fixed-interest securities namely depreciated on account of higher European interest rates in Q1.”
“Overall, the Q1 investment result represents a return of 2.2% on the average market value of the portfolio,” it said. This was 3.8% in Q1 2024.
The running yield was 3.5%, and the reinvestment yield was 4.6%. As at 31 March 2025, the equity-backing ratio, including equity-linked derivatives, amounted to 3.5%. The carrying amount of the investment portfolio as at 31 March 2025 was €227.9 billion.
The carrying amount in the same period last year was €230.7 billion.
Further results by European insurers and reinsurers are expected in the coming days for Q1, including Allianz on Thursday.
