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Munich Re’s net balance of derivatives rises to €1.6bn following hedging strategy

Written by Adam Cadle

Munich Re’s net balance of derivatives rose to €1,600m (–€ 231m) in Q1 2020 as a result of hedging against interest-bearing investments and equities, which gained significantly in value due to developments in the capital markets.

“It was thus possible to largely compensate for write-downs and losses on the disposal of equities,” Munich Re said.

The group’s overall investment result increased to €1,920m (€1,757m) in Q1. In addition, Munich Re said the Q1 investment result represents a return of 3.1% on the average market value of the portfolio. The running yield was 2.5% and the yield on reinvestment was 1.9%.

For purposes of risk mitigation, Munich Re reduced its equity-backing ratio, including equity derivatives, to 3.5% as at 31 March 2020 (6.4% as at 31 December 2019).

Munich Re generated a profit of €221m (€ 633m) in Q1 2020. The solvency ratio was 212% (237% as at 31 December 2019), which is comfortably within the ideal range (170-220%).  

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