German reinsurance giant Munich Re is aiming for a consolidated profit of roughly €4 billion for the 2023 financial year under the new IFRS 17 reporting standard, with profit of around €3.3 billion expected in the reinsurance field of business.
At the same time, the reinsurer anticipates insurance revenues, which it notes represents the IFRS 17 item that will replace premiums in the future, are projected to hit €58 billion across the business.
Group-wide, it’s expected that the return on investment will amount to at least 2.2% for 2023.
Within reinsurance, Munich Re expects insurance revenues to reach some €39 billion in 2023, with profit hitting €3.3 billion. Additionally, the firm expects the combined ratio for property and casualty reinsurance to improve significantly to 86%, mainly a result of the disclosed method per IFRS 17 compared to the previous method under IFRS 4.
In its life and health reinsurance business, Munich Re is forecasting a total technical result of roughly €1 billion, which it says in the future will include the disclosure of the result from business with non-significant risk transfer.
At its ERGO business, Munich Re expects a profit of €700 million in 2023, with insurance revenues projected to total some €19 billion. ERGO’s property and casualty Germany business is expected to produce a combined ratio of around 89%, with the International arm’s combined ratio expected to hit 90%.
“All forecasts and targets face increased uncertainty owing to fragile macroeconomic developments, volatile capital markets and the unclear future of the pandemic. In particular, there continues to be considerable uncertainty regarding the financial impact of the Russian war of aggression in Ukraine,” says the reinsurer. “As always, the projections are subject to major losses being within normal bounds, and to the income statement not being impacted by severe fluctuations in the currency or capital markets, significant changes in the tax environment, or other one-off effects.”
The expected, group-wide consolidated profit of €4 billion for 2023 represents an increase of around €700 million from the guidance for full-year 2022. Within reinsurance, profit guidance for 2022 is €2.5 billion compared with the €3.3 billion announced today for 2023, while the new ERGO profit of €700 million for next year is actually down on the €800 million expected for this year.
Further, insurance revenues of a €58 billion for 2023 is down on the €67 billion projected for 2022.
Munich Re announced these 2022 profit expectations when it released its third-quarter 2022 financial results, which saw the firm’s quarterly profit rise despite the significant impacts of Hurricane Ian.
Analysts at Jefferies have commented this morning that the vast majority of the improvement in the P&C combined ratio does come from the shift in disclosures from the accounting change, but adds that part will reflect the normalisation of 2022’s high cat losses and a material part will be down to price rises.
Similarly, analysts at JP Morgan have suggested that some of the increase is at least due to Munch Re expecting to be more expansive in improving market conditions.
