The costliest natural catastrophe for Munich Re in Q2 2022 was the drought in South America, with losses amounting to some EUR130 million, the carrier said.
The observation was made as the German group posted a 31% fall in net profit for the period, mainly driven by some EUR1 billion of write-downs on its investment portfolio.
Net profit in the quarter of EUR768 million compares with a EUR1.11 billion profit for the corresponding period last year.
Man-made major losses grew to EUR322 million (Q2 2021: EUR229 million), including EUR90 million of losses caused by Russia’s attack on Ukraine. Major-loss expenditure from natural catastrophes increased slightly to EUR253 million (Q2 2021 EUR203 million), with the stand-out event the South American drought.
Weather conditions have been extremely challenging for Latin America agricultural producers in recent years. According to the United Nations, In South America overall, drought conditions led to a 2.6 per cent decline during the 2020-2021 cereal harvest compared with the previous season.
The so-called Central Chile Mega Drought, which has continued for 13 years, is the longest drought in the region in a thousand years.
Additionally, a multi-year drought in the Parana-La Plata Basin, the worst since 1944, is affecting central-southern Brazil and parts of Paraguay and Bolivia. The agricultural damage it has caused, such as by reducing soybean and corn production, has affect global crop markets, according to the UN.
Munich Re warned that its forecasts and targets faced “considerable uncertainty” due to the fragile economy, volatile markets, the pandemic and the war in Ukraine.
Joachim Wenning, chair of the Board of Management, Munich Re, commented: “Munich Re has posted a solid quarterly result despite fierce headwinds from inflation, the cooling economy and the war in Ukraine. The profitability of our business is very good, and we again saw clear and profitable growth. Our clients are all the more appreciative of our strong balance sheet in these uncertain times. Now is the time to seize opportunities in markets that are continuing to harden.”
“At the same time, we are systematically increasing the share of earnings generated by less-cyclical business. The rise in interest rates will give us tailwind in the long term by allowing us to benefit from higher running yields. Our annual target and our objectives for our ‘Ambition 2025’ medium-term strategy are firmly in sight.”