JP Morgan has noted that when looking at the change in earnings expectations in 2024-26 across the insurance sector, reinsurers have seen the biggest benefit from IFRS17.
The firm’s recent Love Actuary report observed it is “evident” that the reinsurers have seen the greatest increase in earnings expectations as a group since the beginning of 2023.
UK life names were reportedly at the other end of the spectrum, although, JP Morgan said it would argue that this positions them for strongest earnings growth going forward.
Looking at the reinsurers as a sub-sector, JP Morgan explained that significant earnings uplifts can be witnessed for all of the companies.
“We attribute this sub-sector increase in estimates to a stronger reinsurance market than was expected at the beginning of 2023; higher discounting benefits than expected when IFRS17 was implemented and initial guidance on the topic was discussed by the companies; and uplifts in life reinsurance profits due to the change in accounting,” the firm said.
JP Morgan stated that Munich Re’s set of results were among “the most positive” for a large cap insurer.
The Love Actuary report continued, “We would conclude that some of this benefit certainly emerged as the result of the transition to IFRS17, but also some of the additional uplift can be attributed to a much more favourable operating environment than the one we previously saw.”
“We remain OW on Munich Re and are encouraged that some of the positive earnings patterns could be seen elsewhere in the reinsurance sub-sector. If we look at pre and post-IFRS17 guidance for Munich Re, we can see a material increase in expectations for the technical result of the Life Reinsurance business.
“Looking at pre-IFRS17 expectations, Munich Re expected this business to achieve a result of €850m by 2025 under the old IFRS4 regime. Fast forward to 2024 and we can see this business aiming for a €1.45bn technical result with delivery well above the quarterly run rate in Q1 2024.”
