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Munich Re making progress

German reinsurer Munich Re reported a solid underwriting performance for 2012 and the shares offer an attractive yield
February 6, 2013

Despite an €800m (£689m) hit from losses related to Hurricane Sandy, German reinsurance giant Munich Re (MUV2) reported solid progress in 2012. Two of its three divisions - reinsurance and primary insurance - reported underwriting profits, with only the health unit making a tiny underwriting loss; its combined ratio (of claims to premiums) was 100.2 per cent.

IC TIP: Buy at 136.85€

The core reinsurance operation - which generates 54 per cent of gross premiums - saw a marked increase in profitability in a year which, with the exception of Hurricane Sandy, was free of catastrophes. That division's full-year combined ratio improved to a solidly profitable 91 per cent from a loss-making 114 per cent a year earlier. What’s more, the primary insurance operation saw its full-year combined ratio improve to 98.7 per cent from last year's 99.1 per cent. Premium rates are moving in the right direction, too, and - during January’s renewal season - Munich Re saw rates rise 0.5 per cent overall. Meanwhile, the investment portfolio delivered a 3.9 per cent investment return - not bad in today’s low interest-rate environment.