Global reinsurance firm Munich Re is expected to continue to grow its portfolios of life and particularly non-life business over the next decade, as it aims for a larger market share even though it expects relatively flat pricing in the short-term.
Munich Re wants to jump from the roughly 6% U.S. market share it has today up to 12% to 13% over the next decade, to match its global share of business, according to JP Morgan analysts who attended a sell-side dinner hosted by CEO Joachim Wenning yesterday.
At its core Munich Re remains focused on achieving non-life reinsurance growth, much of which it expects to achieve organically, especially through growth in lower risk U.S. regional accounts.
Munich Re has already achieved significant growth this year, having taken advantage of the availability of slightly better pricing in the market at January 2018.
Part of this growth came from large quota shares, such as those the firm enters into with Australian counterparties, while the rest was in the U.S. regional accounts, where smaller, more specialist players seem to be increasingly working with the major reinsurers.
Munich Re sees this kind of regional business as its “bread and butter” the analysts said, and this is where the firm is aiming to grow consistently across the next decade, lifting it to a U.S. market share target of 12-13%, up from the 6% it has today.
The reinsurer looks at this growth as a recovery of lost market share, rather than new business, and sees no particular pressure in pricing or terms and conditions, the analysts explained.
Growth for Munich Re means maintaining a conservative risk profile and only growing its natural catastrophe exposure in-line with its overall balance-sheet.
On the acquisition front, Munich Re said it is open to specialty insurance deals and also bolt-ons for its Ergo primary division, but it is not looking at large industrial insurance acquisitions or in reinsurance.
Munich Re maintains its target for EUR 2.8 billion of profit and a combined ratio of 97% by 2020, with this expected to be achieved through cutting back on underperforming business (such as Chinese motor quota share reinsurance) and the expansion into regional U.S. non-life reinsurance accounts.
The reinsurer said this target is based on an assumption of rates remaining at where they began in 2018, but the firm says it would take a “significant” drop in pricing, or an impact such as major losses or financial market dislocation, for the targets not to be achieved.
Munich Re continues to see the reinsurance market as soft, the analysts said, but it does not feel excessive pressure on rates right now.
