Munich Re Group net result targets of €2.4bn in 1H2023

Munich Re generated a profit of €1,154m (1,585m) in the second quarter of 2023, and €2,425m (3,066m) in the first six months of the year. The higher result during the first half of 2022 was attributable to lower unwinding-of-discount effects and lower major-loss expenditure.

Munich Re posted a profit of €2.4bn during the 1H 2023 – considerably greater than half of full-year forecast. Munich Re continues to grow profitably because clients value strength, consistency and expertise, reinsurer said.

Against the backdrop of a mixed macroeconomic environment, the second quarter featured strong business performance both at ERGO and in the reinsurance segment.

Insurance revenue from insurance contracts issued rose year on year to €14,175m (13,772m) in Q2; in Q1–2, the figure increased to €28,448m (27,033m).

The total technical result in Q2 amounted to €2,159m (2,574m) and the investment result rose to €596m (317m). The currency result fell to €44m (634m), as there had been currency gains against the US dollar in the same quarter last year. The operating result was €1,573m (2,250m) and the effective tax rate was 24.6% (28.1%).

Equity was slightly higher at the reporting date (€27,436m) than at the start of the year (€27,245m). The solvency ratio was approximately 273% (260% as at 31  December 2022), which is above the optimum range (175–220%).

Joachim Wenning, Chair of the Board of Management

We’re systematically making progress on decarbonisation in investments and insurance business and on fostering women leaders. Halfway through our Ambition 2025 strategy programme, it’s clear that Munich Re is fully on track to meet its targets.

Joachim Wenning, Chair of the Board of Management

In Q2  2023, annualised return on equity (RoE) amounted to 15.5% (24.2%); the RoE for the first half-year was 16.9% (24.3%) – with both figures at the upper end of the RoE target range of 14 to 16% specified in the Ambition 2025 strategy programme.

The reinsurance field of business contributed €904m (1,439m) to the Group’s net result in Q2; the Q1–2 result was €1,955m (2,763m). The decrease in Q2 was due in part to intentionally incurred losses from the disposal of fixed-interest securities in property-casualty reinsurance.

Insurance revenue from insurance contracts issued rose to €9,300m (9,019m) in Q2. The total technical result was €1,560m (2,014m) and the operating result totalled €1,222m (2,007m).

Life and health reinsurance generated a very strong total technical result of €325m (302m) in Q2. The contribution to net result from release of the contractual service margin was in line with expectations. Strong growth in new business more than offset the amount released.

The net result for life and health reinsurance totalled €326m (561m). Insurance revenue from insurance contracts issued came to €2,606m (2,666m).

Property-casualty reinsurance generated a net result of €578m (878m) in Q2. Insurance revenue from insurance contracts issued rose to €6,695m (6,353m).

On account of higher year-on-year expenditure for major losses, the combined ratio amounted to 80.5% (72.3%) of net insurance revenue for Q2, and 83.5% (74.5%) for Q1–2. The normalised combined ratio was 86.2%.

Munich Re Group net result targets of €2.4bn in 1H2023

Major-loss expenditure increased year on year to €600m (464m) in Q2. These figures include gains and losses from the run-off of major losses from previous years.

Major-loss expenditure corresponded to 9.3% (7.6%) of net insurance revenue, and was thus below the long-term average expected value of 14%, both for Q2 and for the half-year (12.8%).

Although man-made major losses fell to €155m (308m), this was more than offset by major-loss expenditure from natural catastrophes increasing to €445m (156m). The major loss figures above take account of the effects from discounting and risk adjustment.

The costliest natural catastrophe for Munich Re in Q2 was flooding in Italy, with losses amounting to some €200m (nominal value).

In Q2, reserves of €322m (323m) were released for basic losses from prior years; this figure corresponded to 5.0% (5.3%) of net insurance revenue. Munich  Re 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.

Munich Re Group net result targets of €2.4bn in 1H2023

In the reinsurance renewals as at 1  July 2023, the volume of business decreased slightly to €3.6bn (–1.9%), as Munich Re selectively discontinued business that no longer met expectations with respect to prices, terms and conditions. The primary focus of the July renewals was business in North America, South America, Australia, and with global clients.

Munich Re’s investment result increased to €596m (317m) in Q2, with regular income from investments climbing to €1,763m (1,752m).

While the balance from write-ups and write-downs was –€11m (–775m), the balance from gains and losses on disposal came to –€396m (725m). The fair-value change was –€610m (–1,230m). Impairment losses resulting from both lower stock markets and higher interest rates were the main causes of the lower investment result in the same quarter last year.

Munich Re intentionally incurred losses in this quarter that had been realised due to the disposal of investments, primarily fixed-interest bonds. This was done with an eye to investing anew at higher interest rates, in turn more quickly profiting from higher-yield bonds.

Nataly Kramer   by Nataly Kramer