Munich Re profit tops expectations despite Ian, Ukraine war hit

Profits at global reinsurance giant  Munich Re soared despite costly claims from natural catastrophes including Hurricane Ian and investment hit from the ongoing Russia-Ukraine war. The company is taking advantage of digitisation and a diverse portfolio to open up new earnings prospects, and has set an ambitious target of generating a consolidated profit of €4 billion in 2023.

The world’s second largest reinsurer reported a profit of €3.4 billion in the 2022 financial year, exceeding its profit guidance of €3.3 billion. The consolidated result was supported by €1.5 billion profit in the fourth quarter versus €871 million in the prior year period.

The gross premiums written increased substantially by 12.7% to €67.13 billion year on year from prior year’s €59.56 billion.

Munich Re’s investment results, however, decreased to €4.9 billion in 2022, compared with €7.15 billion a year ago. The net balance of derivatives amounted to negative €1.62 billion from –€774 million, chiefly due to losses on derivatives on fixed-interest securities. This decline was primarily attributable to impairment losses on equities as a result of falling stock markets, and to impairment losses on fixed-interest securities totalling around €850 million as a result of the war in Ukraine.

Within its reinsurance field of business, profits rose to €2.59 billion from €2.33 billion in the prior year. Property/casualty reinsurance contributed €1.9 billion to the 2022 result, which was slightly down on the previous year’s €2 billion.

P&C premium volume grew robustly to €34.4 billion, compared with €28.8 in 2021. Despite high natural catastrophe losses in the market, the combined ratio decreased to 96.2% of net earned premiums in 2022 from 99.6% in 2021.

Major losses of over €10 million each totalled €4,17 billion for the full year, slightly lower than the previous year. Man-made major losses amounted to €1.74 billion, compared with €1.16 billion in 2021. The increase was due in part to expenditure related to the war of aggression in Ukraine totalling €475 million. Major-loss expenditure from natural catastrophes amounted to €2.43 million, down from €3.14 billion a year ago.

The costliest natural catastrophe for Munich Re in 2022 was Hurricane Ian, with losses of around €1.6 billion.

Munich Re generated a profit of €826 million in its ERGO field of business in 2022, compared with €605 million in 2021. Overall premium income across all segments rose substantially to €20.06 billion; gross premiums written increased to €19.06 billion. In the property/casualty Germany segment, the combined ratio improved significantly to 90.6% despite major losses. In the ERGO International segment the combined ratio rose about two percentage points to 94.3%.

In 2023, Munich Re is aiming for a profit of €4 billion. The Group’s insurance revenue, which will supersede “premium income” in future, is expected to reach around €58 billion in 2023. The reinsurer anticipates that the return on investment will amount to at least 2.2%.

Munich Re anticipates insurance revenue of about €39 billion and a profit of around €3.3 billion in 2023. The combined ratio in property/casualty reinsurance will likely decrease significantly to around 86% – chiefly due to the disclosure method used under IFRS 17.

The group’s CEO Joachim Wenning (pictured) said he is “pleased” with the progress the company has made in times of uncertainty due to war and volatile capital markets.

“Munich Re absorbed the crises of 2022 well and continues to grow profitably,” he said. “We are robust, both financially and in terms of capital. Our broadly diversified business portfolio not only makes us more resilient, but also opens up new earnings prospects.”

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

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