Munich Re predicts profit despite WTC losses

Despite being among the heaviest hit by the September 11 terrorist attacks on the World Trade Center and Pentagon, and posting a third quarter loss of US$1.07 billion, Munich Re says it will still post a profit for the year.The company was hit not only with September 11 losses, which it confirmed at US$1.84 billion, but also Bayer’s recall of Baycol/Lipobay, the probable total loss of the communications satellite PAS 7, Typhoon Nari in Taipei, and the explosion in a chemical plant in Toulouse.The reinsurance operation’s combined ratio soared to 179.6%, and 133.9% for the first nine months of the year overall. As a result of the September 11 losses, per share losses are US$6.09 for the quarter, and earnings per share drop to US$0.43 for the first nine months of the year.However, the company is posting a profit of US$75 million for the first nine months of the year and expects to pay a dividend of US$1.11 per share for the year. This is largely the result of premium growth, which was up 20% for the third quarter, to US$7.8 billion, compared to last year.Munich Re is also predicting acceleration of rate hardening and a flight to quality, financial stable reinsurers in light of the September 11 events. Not only did the tragedy show the need for reinsurance coverage in the event of disaster, says Munich Re chairman Dr. Hans-Jrgen Schinzler, but it “also highlights the question of reinsurers’ security their financial strength and claims-paying ability. Primary insurers will take a very close look at their reinsurers in future to be sure they can rely on having their claims paid even when the going gets tough”.