Munich Re profit slides 14% on major nat cat blow, but bullish on €4bn 2023 target
Global reinsurance giant Munich Re’s profit fell 14% in the first quarter 2023 as it shouldered higher than expected major nat cat losses, which nearly doubled from the previous year. However, the reinsurer remains confident on achieving its target net result of €4 billion for 2023, having seen substantial premium growth and rate increases during April renewals and a positive market outlook with “attractive growth opportunities” on the horizon.
Munich Re generated a net profit of €1.27 billion in Q1 2023, marking a 14% decline compared to the same period last year when it stood at €1.48 billion. The reinsurance field of business contributed €1.05 billion to the overall net result, showing a decrease from €1.32 billion in Q1 2022.
On the other hand, Munich Re witnessed a growth in its insurance revenue from insurance contracts issued, with €14.28 billion recorded in Q1 2023 as opposed to €13.26 billion in the previous year. Within its reinsurance field of business, insurance revenue from insurance contracts issued also increased to €9.23 billion from €8.65 billion in the same period last year.
Munich Re’s property/casualty reinsurance recorded a net profit of €760 million in Q1, marking a decline of around 20.7% compared to the net profit of €958 million in the same period last year. However, there was a positive development in insurance revenue from insurance contracts issued, which increased to €6.5 billion, surpassing the €5.74 billion recorded in Q1 2022.
P&C combined ratio deteriorated to 86.5% in Q1 2023, compared to 77% in Q1 2022. This rise was primarily driven by a surge in major losses exceeding €30 million each, amounting to a total of €1.035 billion. Major losses from natural catastrophes climbed to €870 million, almost double the figure of €448 million recorded in the previous year.
Munich Re increased its business volume to €2.9 billion (+11.1%) in the reinsurance renewals as of April 2023. Growth opportunities were leveraged in Asia (Japan and India) and Latin America, while non-proportional natural catastrophe business expanded. Prices showed positive development, compensating for higher loss estimates caused by inflation or other trends. Munich Re selectively discontinued underperforming business and achieved an average portfolio price increase of 4.7%.
In the ERGO business segment, Munich Re saw a higher net profit of €219 million, with increased insurance revenue across all segments reaching €5.041 billion. The P&C Germany segment showed an improved combined ratio of 81.2%, while ERGO International had a ratio of 95.4%.
The investment result rose to €1.612 billion, benefiting from higher interest rates and surpassing the full-year forecast.
Munich Re maintains confidence in positive business opportunities and aims to achieve a net result of €4 billion for the 2023 financial year.
Commenting on the results, the company’s chief financial officer Christoph Jurecka, 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.”
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