Munich Re axes major client at 1/1, cutting 9 pts from renewals growth

Global reinsurance group  Munich Re held to 1.3% volume growth at the  1/1 renewals largely on account of dropping one major client with an unpreferred profile, but cheers that its trigger shy ways have ensured dry powder for pending reinsurance renewals with their higher nat cat profile.

“We have grown as much as we wanted,” CEO Joachim Wenning (pictured right) told his company’s Q4 call for analysts and investors.

Wenning cited “one large transaction where we deliberately reduced our share significantly” accounting for a “huge amount” of the cap on growth. Normalised for that deal, volume growth would have measured neighbourhood 10%, he suggested. That case may have been one of avoiding overly bundled aggregate perils, he hinted.

“That gave me confidence that we did everything right,” Wenning said after admitting to initial surprise that his company’s 1/1 renewals in a hard market had left the group up only 1.3% in volume.

Munich Re worked to move from proportional to excess of loss, both in property and casualty, but was limited in impact by the relative size of those books despite double digit volume gains for XoL as a whole.

Shrinkage in the proportional book was visible in the US where admitted primary carriers struggle to keep pace on regulatory-approved rates across all 50 states in the high-inflation environment, Wenning indicated.

Rate gain, counted above and beyond Munich Re’s expectation for loss trend and inflation, also rendered an underwhelming reading at 2.3%, but Wenning bristled at suggestion that his company had underperformed in the hard market.

Instead, Munich Re has given the market the only honest view of inflation and loss trend, Wenning argued. Munich Re’s 2.3% risk- and inflation-adjusted rate gain “is a real proxy for the real margin improvement we expect in the combined ratio moving forward,” he said.

With peers ballyhooing 1.1 results including double digit rate gain of a less certain pedigree, Wenning said: “please go back and ask them if they expect double digit margin increases.”

Nor will new margin be set aside in the form of additional reserves, CFO Christoph Jurecka (picture left) added to draw a distinction to at least one major rival. “The pricing improvement we achieved will be fully translated into the combined ratio,” Jurecka said.

Wenning lightly encouraged investors to think of the 2.3% figure as proof of Munich Re’s more conservative credentials. “Maybe our inflation assumptions are on the cautious side, but frankly, I love for them to be on the cautious side,” he told analysts.

The 1.1 hesitancy leaves Munich Re with a “very big” dry powder cache for pending 2023 renewal seasons and is ready to deploy, albeit only to within the group’s target allocation ranges. “We are very optimistic for the upcoming renewals,” Jurecka said.

For Munich Re, a much-higher 31% of the book renewing in April is in nat cat, as is 27% of the book renewing July 1. That is considerably above the 11% in the January 1 book, where even a 40% volume gain for property XoL amid price gains in the high teens could do little to add glamour to Munich Re’s headline rate and volume increases.

To read Munich Re’s full year 2022 results,  click here.

To read more on Munich Re’s 1/1 reinsurance renewals,  click here.

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