Munich Re posts net result of €1,271m for Q1, confident of meeting full-year guidance

Munich - Munich Re has announced that it has generated a net result of €1,271m (1,480m) in Q1 of 2023. The global reinsurer said the Q1 result of 2022 year had been bolstered in particular by low major losses in property-casualty reinsurance, as well as by currency gains, while the result for the first quarter of 2023 was impacted by precisely the opposite effects. Munich Re said its insurance revenue from insurance contracts issued climbed to €14,273m (13,261m), while its total technical result amounted to €1,809m (1,863m).

The company said equity was higher at the reporting date (€28,182m) than at the start of the year (€27,245m), with its solvency ratio at approximately 254% (260% as at 31 December 2022), which is above the optimum range (175–220%). It said the annualised return on equity (RoE) for Q1 2023 was 17.3% (23.6%), while a share buy-back with a volume of €1bn had already been planned.

Christoph Jurecka, Munich Re Group CFO said: ”The earthquake that hit Turkey on the border with Syria in February 2023 was one of the most catastrophic we have seen in recent history. Around 60,000 people lost their lives. The insured losses amount to some €4–5bn, of which Munich Re is shouldering €0.6bn – one of the reasons why major losses from natural catastrophes in Q1 2023 were higher than expected. Owing to otherwise pleasing operational performance and a strong investment result, however, Munich Re generated a net result of almost €1.3bn. In addition, the April renewals saw Munich Re continue its trend of profitable growth. Accordingly, we are confident that we can reach our 2023 net result guidance of €4bn; the chances for us to surpass this target have increased.”

Munich Re also announced that it presented its results for Q1 2023 in accordance with the new accounting standards IFRS 9 and IFRS 17 for the first time, and comparative figures from the previous year for the insurance business are already shown on the basis of the new standard (IFRS 17). The corresponding figures for the investment business are, in part, still based on IAS 39, the standard applicable up to 31 December 2022, the company said, explaining that for that reason, they are not fully comparable with the Q1 2023 figures disclosed in accordance with IFRS 9. However, transitional effects have already been anticipated wherever possible*. 

Reinsurance: Net result of €1,051m

Munich Re said its reinsurance field of business contributed €1,051m (1,324m) to the Group’s net result in Q1, while insurance revenue from insurance contracts issued also climbed to €9,232m (8,656m), with the total technical result amounting to €1,248m (1,588m), and the operating result coming in at €1,467m (1,598m). 

It said life and health reinsurance generated a total technical result of €320m (238m) in Q1, with the contribution to net result from release of the contractual service margin in line with expectations. Strong growth in new business more than offset the amount released, it said, with net result for life and health reinsurance totalling €291m (367m). Insurance revenue from insurance contracts issued came to €2,734m (2,913m). 

Property-casualty reinsurance generated a net result of €760m (958m) in Q1, with insurance revenue from insurance contracts issued rising to €6,498m (5,743m), and the combined ratio stood at 86.5% (77.0%) of insurance revenue (net). The normalised combined ratio was 85.1%.

Major losses of over €30m each totalled €1,035m (618m), it sad, further explaining that these figures include gains and losses from the run-off of major losses from previous years. Major-loss expenditure corresponded to 16.4% (11.1%) of insurance revenue (net), and was thus above the long-term average expected value of 14%. Man-made major losses fell slightly to €165m (170m), while major losses from natural catastrophes rose to €870m (448m). The major loss figures above take account of the effects from discounting and risk adjustment, said the reinsurer, while as a consequence of the earthquake in Turkey, Munich Re posted nominal losses of €0.6bn.

In Q1, the Group said, reserves of €314m (291m) were released for basic losses from prior years; this figure corresponded to 5.0% (5.3%) of insurance revenue (net). Munich Re explained that it continually seeks to set the amount of provisions for newly emerging claims at the very top end of the estimation range so that profits from the release of a portion of these reserves can be generated at a later stage. 

In the reinsurance renewals as at 1 April 2023, Munich Re was able to increase the volume of business written to €2.9bn (+11.1%). It was possible to leverage growth opportunities, especially in Asia – particularly in Japan and India – as well as in Latin America. Non-proportional natural catastrophe business was expanded, in particular, in view of attractive rate levels. By contrast, Munich Re once again selectively discontinued business that no longer met risk/return expectations.

Prices developed positively overall and for the most part more than compensated for the significantly higher loss estimates in some areas, which were caused primarily by inflation or other loss trends. To varying degrees, price increases were evident around the world. All in all, prices for the Munich Re portfolio increased by 4.7%. This figure is, as always, risk-adjusted. In other words, price increases are offset if they are associated with increased risk and, consequently, elevated loss expectations. 

Munich Re expects the market environment to remain positive and to present attractive growth opportunities in the upcoming July renewal rounds.

Outlook for 2023: Annual guidance unchanged at €4.0bn

Munich Re said it remains confident in its outlook for positive business opportunities in 2023. The targets communicated for 2023 in its Group Annual Report 2022 are thus unchanged. Accordingly, the Group said it is aiming to generate a net result of €4.0bn for the 2023 financial year.

All forecasts and targets face considerable uncertainty owing to fragile macroeconomic developments and volatile capital markets. In particular, there continues to be considerable uncertainty regarding the financial impact of the Russian war of aggression in Ukraine, it said. As always, the projections are subject to major losses remaining within normal bounds, and to the income statement not being impacted by severe fluctuations in the currency or capital markets, significant changes in the tax environment, or other one-off effects, concluded the Group.