Munich Re has significantly scaled back its business in negotiations with primary insurers in the face of crumbling prices. In the April renewal round, which primarily focuses on Asian business, the world's second-largest reinsurer announced on Tuesday that it had written 18.5 percent less business. Prices fell by an average of 3.1 percent. Negotiations covered just over a tenth of the total business volume. 'Prices remain the main battlefield - especially in the natural catastrophe business,' said CFO Andrew Buchanan, who nevertheless expressed satisfaction with the renewals. 'Price levels remain good and the quality of our portfolio is high.' However, smaller rival Hannover Re wrote significantly more business despite a similar price trend.

The fact that Munich Re's business volume declined so drastically at the start of the year unsettled analysts. Group-wide, the decline stood at five percent and was primarily attributed to currency effects. However, at 15.0 billion euros, premium volume fell significantly short of expert estimates. In property-casualty reinsurance, insurance revenue even slumped by 20 percent - 'quite dramatic,' as JP Morgan analysts wrote. This also impacts the loss budget: Munich Re now calculates major losses at 18 percent of premium income in the division, up from 17 percent previously. Prices are falling while risks remain the same, Buchanan summarized. However, he expects insurance revenue to accelerate in the coming quarters. Munich Re shares fell 4.5 percent to 477 euros.

The slowdown in the core business aligns with the strategy of the new CEO Christoph Jurecka. He aims to make Munich Re less dependent on the highly volatile business of natural catastrophe coverage and other major losses. The more predictable segments of life reinsurance, primary insurer Ergo, and specialty insurance are intended to contribute 60 percent of profits in the future, up from 50 percent previously.

In the first quarter, Munich Re benefited from an unusually low major loss volume of 3.5 percent of premiums. Only 130 million euros were incurred for major losses, compared to over one billion a year earlier - primarily due to the wildfires in Los Angeles. As a precaution, Munich Re has set aside 90 million euros for potential losses resulting from the Iran war, 60 million of which are in specialty insurance. This is a conservative estimate, especially since most reinsurance policies include war exclusions, Buchanan said. He expects the indirect consequences of the war, in the form of rising inflation, to have a greater impact. 'But we are already familiar with that,' he remarked calmly.

The low loss burden caused net profit for the quarter to jump 57 percent to 1.71 billion euros, even though investment returns were only 2.9 percent. For the full year, Munich Re continues to calculate with more than 3.5 percent. Munich Re is sticking to its target of a net profit of 6.3 billion euros for the current year.

(Report by Alexander Hübner, edited by Myria Mildenberger. For inquiries, please contact our editorial office at berlin.newsroom@thomsonreuters.com (for politics and economics) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).)