Third-quarter earnings at Munich Re MUV2 exceeded expectations as most of its insurance operating subsidiaries reported improved performance on a year-over-year basis. Life reinsurance surged 25% in the quarter from the comparative quarter last year due to demand driven by over solvency issues from primary insurers.
Property-casualty reinsurance also increased premiums and held its combined ratio under 90% in the quarter, about the same as last year. Primary health insurance and Munich Health both reported increased profitability as did the primary property-casualty group.
The lone disappointment was in primary life insurance, which recorded a loss. Investment income fell slightly from last year due to lower interest rates that impacted fixed-income yields. Munich Re stated that it continues to reduce exposure to the eurozone and that only EUR 5 billion is still exposed to GIIPS sovereign bonds.
Year to date, Munich Re has earned in excess EUR 2.7 billion, causing it to raise its consolidated profit guidance to EUR 3 billion, provided that its estimates of losses from Hurricane Sandy remain in the EUR 400 million-EUR 600 million range. We remain concerned that Munich Re’s business and financial exposure to what appears to be a further deterioration in Europe and, more importantly, a slowdown in Germany, could weigh on near term results.
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