Munich Re holds FY’22 target after €1.6b Hurricane Ian hit

Munich RE suffered €1.6 billion in losses on Hurricane Ian to throw it from its combined ratio target in P&C reinsurance and primary insurance at unit Ergo, but said that surging gains in life & health reinsurance left bottom line hopes intact.

The €3.3 billion full-year profit target "will be significantly more difficult to achieve given the claims experience and business environment" and additionally hinges on some expected one-offs in Q4, management said.

"Although Hurricane Ian and the macroeconomic environment are making it significantly more challenging for us, we are firmly adhering to our annual guidance of €3.3bn," CFO Christoph Jurecka said. "All fields of business are contributing to sustainably positive performance.”

Q3 loss experience in P&C reinsurance threw the group off its target for a 94% combined ratio in 2022 and 97% is now considered the likely results.

P&C reinsurance claims rose nearly 27% year on year to €6.94 billion. Ian formed the core of €1.83 billion in Q3 nat cat losses which, together with man-made, came to €2.32 billion in large loss in the quarter. That 27% of net earned premium proved twice the long-term average.

After 29% growth in net earned premiums, the segment was left with a combined ratio at 108.2%, down over four percentage points from the prior year period, enough to cut 29% from the Q3 underwriting loss to €453 million.

Life and health came to the rescue in Q3 and will save the full-year profit guidance as well. The group took €109 million in one-off currency gains in L&H reinsurance and €329 million in German primary life & health to more than quadruple Q3 profits from its overall L&H lines.

For its FY2022 guidance, Munich Re doubled its expected earnings from the life & health reinsurance unit from €400 million to €800 million.

Ergo property and casualty also fared well, doubling the Q3 underwriting profit as 4.6% net earned premium growth leveraged well against a 10.7% decline in claims. German operations enjoyed "favourable claims experience" with below-expected large loss, enough to offset a 1.5 percentage point increase in combined ratios in the international segment from higher losses in Spanish health business and higher costs in international legal protection business.

Ergo P&C is now expected to take a 94% combined ratio outside of Germany, up 2 percentage points from the prior reigning forecast. German P&C primary business is still expected to deliver on the long-promised 91% combined ratio target.

At the group level, M8nich Re delivered €527 million in Q3 consolidated profits, up 44% from the prior year period but not enough to keep the group on pace to its prior year 9M tally.

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