Munich Re plots bold new strategy 2025; seeks to expand specialty business

Global reinsurer Munich Re intends to further expand its specialty business and grow its P&C reinsurance premiums over the next five years as it targets a return on equity (RoE) of between 12–14 percent by 2025 — CEO Joachim Wenning explained while revealing the reinsurer’s new growth and results targets.

The reinsurer has set out a series of bold targets for the next five years, underpinned by scale, shape and success as guiding principles, as it looks to grow profitably over the coming years.

Munich Re intends to advance its transformation towards new business models that span the entire value chain, while retaining and bolstering its core business model.

Overall, the company is targeting a return on equity (RoE) between 12 and 14 percent by 2025, which would establish the firm as one of the best in its peer group. The reinsurer stated that the improvement in RoE will be fuelled by higher profitability, growth, and an RoI performance that will counteract the erosion of regular investment income caused by low interest rates. Additional earnings growth will translate into higher earnings per share, which are expected to increase annually by ≥5 percent on average by 2025.

The solvency ratio is expected to remain in the ideal range of 175–220 percent, it said.

Munich Re highlighted that its reinsurance field of business will play a key role in achieving the financial targets of the 'Ambition 2025' strategy, as it sees opportunities for organic growth owing to recent, significant improvements in the market conditions.

In property/casualty reinsurance, Munich Re is targeting a combined ratio of 95 percent each year through 2025. It is expecting premiums to rise to approximately €31.5 billion by 2025, with traditional reinsurance business accounting for nearly €22 billion and the Risk Solutions for around €9.5 billion.

In the life and health reinsurance segment, premium income is anticipated to grow to approximately €15 billion by 2025.

At the same time, Munich Re announced its intention to further expand its specialty business pursuits.

The reinsurer has also set its ERGO field of business goals of boosting profitability to match peers and further consolidating its presence in Germany. ERGO anticipates that its combined ratios will fall to approx 90 percent for property/casualty insurance in Germany and 91 percent for the international portfolio.

The carrier also shared updates on its targets of the Paris Climate Agreement. It will seek to reduce greenhouse gas emissions by 5 percent between now and 2025, and cut its coal-related exposure in its direct and facultative insurance business by 35 percent worldwide, before eliminating this exposure altogether by 2040. Munich Re has already stopped insuring new coal-fired power plants, new coal mines, and oil sands mines. By 2030, the group expects to achieve net-zero CO2 emissions from its business operations.

Commenting on the new growth strategy and targets, Wenning said: "With our Munich Re Group Ambition 2025, we’ve created a strategy that is uniform across the Group – spanning reinsurance, primary insurance and asset management. We have committed ourselves to ambitious financial targets, and we will continue adding value for our shareholders, clients, staff and communities. The Munich Re Group Ambition 2025 will help us to elevate Munich Re to a new level of success."