Munich Re has reported a net result of €4.6 billion for the 2023 financial year, which is above its revised €4.5 billion profit target, supported by a reinsurance result of €3.9 billion and an improved performance at ERGO.
Total profit for the year did come in below the €5.3 billion reported in 2022, with a net result of just over €1 billion in Q4 2023, down from €1.1 billion in the prior year quarter.
Group-wide, insurance revenue from insurance contracts issued rose to €57.9 billion from €55.4 billion, due in part to organic growth in the property and casualty (P&C) reinsurance segment and at ERGO, offset by currency translation effects (see 2024 Global Reinsurance Rate for Property Catastrophe Forecasts).
The year 2023 saw a double-digit growth in available capital from both traditional reinsurers and alternative capital providers, bolstered by strong earnings, market stabilization, and the transition to the IFRS17 accounting standard for some.
Analysis indicates that the top global reinsurance groups experienced a nearly 17% reduction in shareholders’ equity due to rising interest rates, driving their available capital down from $475 bn to $411 bn.
For 2023, the reinsurer’s return on equity (RoE) amounted to 15.7% compared with 20.2% a year earlier, as the technical result increased to €7.6 billion from €7.1 billion.
The investment result increased from €2.9 billion to €5.4 billion, while the operating result fell from €6.8 billion in 2022 to €5.7 billion in 2023.
Munich Re’s reinsurance operation contributed €3.9 billion (€4.7bn in 2022) to the net result of which €926 million (€1.1bn in Q4 2022) was in the fourth quarter. Insurance revenue rose to €37.8 billion, as the technical result increased 3% year-on-year to €5.4 billion, and the operating result fell 20% to €4.7 billion.
In P&C reinsurance, the net result moved from €3.4 billion in 2022 to €2.4 billion in 2023, while insurance revenue rose 7% to €27.1 billion. The P&C combined ratio deteriorated slightly to 85.2% from 83.2%.
Reinsurance rate increases for property catastrophe business are likely to slow to below 10% on average when contracts are renewed in January 2024. Improvements in underwriting margins will therefore be less significant than in 2023. Typically, two-thirds of non-facultative reinsurance business is renewed in January, mostly in Europe.
Major loss expenditure fell from €3.7 billion in 2022 to €3.3 billion in 2023, of which €873 million was in Q4.
The company reports that major loss expenditure corresponded to 12.6% of net insurance revenue and was below the expected value of 14% in the financial year and in Q4.
Losses from natural catastrophes rose to €2.3 billion from €2.1 billion, with the largest individual loss for the firm the earthquake in Turkey, with a nominal value of around €700 million. In Q4 2023, the largest loss was Hurricane Otis in Mexico at €453 million. Man-made losses amounted to €943 million for Munich Re in 2023, down on the €1.6 billion seen a year earlier.
Commenting on the more frequent extreme weather, Munich Re says that it will continue to offer sufficient insurance capacity for such risks, with an eye to sustained growth in this market.
The private insurance industry supplies enough global capacity in principle to cover the rising risks associated with extreme weather. But prices for cover must be appropriate in order to create incentives for better preventative measures.
In the life and health (L&H) reinsurance division, the technical result rose 38% year-on-year to €1.43 billion, beating the target of €1.4 billion.
The net result in L&H reinsurance increased to €1.4 billion from €1.3 billion, while insurance revenue from insurance contracts issued declined to €10.7 billion from €11.2 billion due to currency translation effects.
Munich Re has also provided an update on the January 1st, 2024, reinsurance renewals, when around two-thirds of non-life reinsurance treaty business was renewed, with a focus on Europe, the US, and global business.
At 1.1 2024, the company grew the volume of business by 3.5% to €15.7 billion, taking advantage of attractive business opportunities in nearly all regions and classes of business.
It was able to maintain the high quality of its portfolio thanks to stable or improved contractual terms and conditions, while price development was stable overall.
by Yana Keller
