German reinsurer Munich Re has posted a net result of €608 million for the first quarter of 2022, improving slightly on the same period last year despite its results being “severely impacted” by the conflict between Russia and Ukraine.
Its reinsurance operations contributed €511 million to the consolidated result, compared with €410 million previously, as a loss of €78 million in life and health business was offset by a positive result of €589 million in property and casualty.
This was despite the fact that Munich Re posted expenditure related to the war in Ukraine of slightly over €100m in some specialty lines.
Analysts at Jefferies have previously estimated that Munich Re could ultimately assume €500m of reinsured claims from the ongoing crisis in Eastern Europe, although Joachim Wenning, Chair of the Board of Management, has assured that the company will “easily absorb” any direct effects of the war on its business.
While the reported figure is much lower than Jefferies’ estimates so far, CFO Christoph Jurecka acknowledged that they were only the “first claims” seen by the reinsurer, so it seems we can expect more losses to be reported in the following financial periods.
And it wasn’t only direct exposure that Munich Re faced to the Russia-Ukraine conflict in Q1, as the company’s investment result decreased from €1,691 million to €987 million, owing largely to gross write-downs of almost €700 million on Russian and Ukrainian bonds, which impacted the investment results of both reinsurance and Munich Re primary insurance unit, ERGO.
On the L&H side, Munich Re also continued to be buffeted by global crises, as its negative result was attributed mainly due to COVID-19-related losses of €150 million, above all from the Omicron wave in the USA.
Looking at premium volume, Munich Re said its P&C premiums increased from €6,330 million to €7,938 million, with “a continued strong focus on quality,” while for L&H premium income rose from €3,058 million to €3,369 million.
The combined ratio improved from 98.9% to 91.3% of net earned premium, with major losses of over €10m each totalling €667 million, significantly down from the €892 million recorded in Q1 of 2021.
Man-made major losses declined from €247 million to €185 million, while major losses from natural catastrophes declined from €646 million to €481 million, with major events including heavy rainfall in eastern Australia, resulting in losses of around €440 million, and the winter storms in Europe, which produced losses of slightly below €120 million for Munich Re.
In the reinsurance renewals as at 1 April 2022, Munich Re was able to increase the volume of business written to €2.7 billion (+7.6%), and reported that it was possible to “tap into growth opportunities, especially in Asia – particularly in Japan and India – as well as in Latin America.”
Prices were up overall in the sectional markets, with significantly different trends dependent upon claims experience, future loss expectations and the situation in each individual market, the reinsurer added, and prices for reinsurance cover rose considerably in some markets, including the USA.
Munich Re anticipates that the market environment will remain stable in the next renewal round in July, offering attractive growth opportunities.
As a result of the “advantageous business prospects” that Munich Re continues to see in reinsurance in 2022, the company is still aiming for a consolidated result of €3.3 billion for the 2022 financial year, the achievement of which is supported by a remaining major-loss budget in property-casualty reinsurance of around €3.3 billion for the rest of the year.
However, it cautioned that: “All forecasts and targets face considerable uncertainty owing to fragile macroeconomic developments, volatile capital markets and the unclear future of the pandemic. In particular, there is considerable uncertainty regarding the financial impact of the Russian war of aggression in Ukraine.”
