Munich Re posts higher third quarter profit despite Hurricane Ian losses of 1.6 billion euros

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Global reinsurer Munich Re reported a profit of 527 million euros and 1.9 billion euros for the third quarter and first nine months of 2022, respectively, despite a rise in large losses within non-life reinsurance (P&C) following Hurricane Ian losses of approximately €1.6 billion.

Earnings for the quarter increased year-over-year, although they were down slightly for the first 9 months of 2022 as the reinsurer noted above-average expenses for natural disasters.

In fact, major claims over €10 million each reached over €2.6 billion in Q3 2022, corresponding to 26.9% of net earned premiums, and above the long-term average value. expected 13% for Q3 and 9M 2022.

The costliest nat cat event for the reinsurer was Hurricane Ian with 1.6 billion euros. In total, the nat cats cost the reinsurer 1.8 billion euros in the third quarter of 2022, compared to 1.7 billion euros in the third quarter of 2021.

At the same time, Munich Re recorded man-made losses of 489 million euros over the period, compared to 245 million euros a year earlier.

Stratumn, by SIA Partners

In addition, the company generated reserves of 344 million euros for basic claims from previous years, corresponding to 4% of net earned premiums.

Due to claims, the P&C reinsurance business contributed a negative €343m to comprehensive income in Q3, with a combined ratio of 108.2% for the quarter and 96.9% for 9M 2022. However, premiums have increased sharply in this segment, from almost 8 billion euros last year to 10.2 billion euros in the third quarter of 2022.

In life and health reinsurance (L&H), Munich Re announced a substantial increase in profit to 424 million euros for the quarter, against 94 million euros a year earlier, while turnover rose to 3.5 billion euros. Within L&H reinsurance, the technical result improved from just 9 million euros last year to 293 million euros in the third quarter of 2022.

In addition, losses related to the COVID-19 pandemic decreased significantly to 35 million euros for Q3 2022 and to 323 million euros for 9M 2022.

Combined, the performance of the reinsurance unit contributed €81 million to comprehensive income for the third quarter and €1.2 billion for the first nine months of the year. Munich Re attributes the quarter-over-quarter decline to the cost of Hurricane Ian as well as a weaker investment result.

Within reinsurance, operating income was negative for the quarter at -687 million euros, while gross written premiums jumped significantly, year-on-year, to 13.7 billion euros.

Regarding the ERGO business, profit reached €446 million for the quarter and €702 million for 9M 2022, which is up significantly for both periods, driven by a one-time effect in the ERGO Life and Health Germany segment. In the third quarter, all segments continued to experience premium growth, with total premium income reaching €4.7 billion in the third quarter and gross written premiums reaching €4.5 billion.

In total, Munich Re announced an operating loss of 346 million euros for the third quarter, against a gain of 204 million euros a year earlier. The other non-operating result was also negative at -5 million euros, while the foreign exchange result increased significantly to 846 million euros, partly due to foreign exchange gains related to the US dollar.

Group-wide, gross written premiums increased significantly to over €18.2 billion in the third quarter and jumped 14% to over €50.9 billion in 9M 2022.

On the asset side of the balance sheet, Munich Re reported that its investment result fell from more than 2 billion euros in the third quarter of 2021 to 904 million euros in the third quarter of 2022. Overall, the Third quarter investment result represented a return of 1.6% on the average market value of the portfolio.

Looking ahead, Munich Re says that in light of “very positive” business performance so far in 2022, it has raised its guidance for reinsurance gross written premiums to €48 billion from €45 billion. previously, and in ERGO at 19 billion euros compared to the previous 18.5 billion euros. Across the group, the target has increased from 64 billion euros to 67 billion euros.

In addition, the reinsurer is still aiming for a consolidated result of 3.3 billion euros for the year 2022, but warns that this will be much more difficult to achieve given the loss experience and the commercial environment. The firm anticipates a consolidated result of 2.5 billion euros in reinsurance for the year, down from the previous target of 2.7 billion euros. However, at ERGO, the company expects a consolidated result of 800 million euros for the year, which is above the previous target of 600 million euros.

In P&C reinsurance, Munich Re now expects to produce a combined ratio of around 97% of net premiums earned for the full year, compared to a previous target of 94%.

In L&H reinsurance, the firm indicates that it now anticipates a technical result well above 800 million euros for 2022.

Chief Financial Officer (CFO), Christoph Jurecka, said: “Financial strength and professional expertise are of fundamental importance to our clients in times of crisis and guide Munich Re in its actions. Hurricane Ian fits the pattern science would expect of a warming world. Therefore, the increasing likelihood of such extreme storms is an integral part of our models and should be reflected in pricing.

“The sustainable and reliable offer that our customers expect from us is based on realistic analyses, not only of the risks of natural disasters, but also of cyber and pandemic risks. And even if Hurricane Ian and the macroeconomic environment complicate our task considerably, we firmly maintain our annual objective of 3.3 billion euros. All areas of activity contribute to a sustainably positive performance.

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