Global reinsurer Munich Re has reported a net result of approximately €1.3 billion for the first quarter of 2023, down on the previous year (€1.5bn) as natural catastrophe events resulted in above-average losses for the firm, driven by the Turkey and Syria earthquake.
Group-wide, insurance revenue from insurance contracts issued increased to €14.3 billion in Q1 2023 from €13.3 billion a year earlier, while the total technical result dipped slightly to €1.8 billion, with Munich Re reporting a Q1 2023 operating result of €1.8 billion.
Within its reinsurance business, which contributed €1.05 billion to the Group’s net result in the quarter, insurance revenue from insurance contracts issued hit €9.2 billion compared with €8.7 billion last year.
The total technical result amounted to €1.25 billion in Q1 2023 against €1.6 billion in Q1 2022, and the operating result was €1.5 billion, down slightly from the €1.6 billion seen in Q1 2022.
The company’s property and casualty (P&C) reinsurance arm produced a net result of €760 million in Q1 2023, as insurance revenue from insurance contracts issued rose to €6.5 billion. The P&C Re combined ratio rose to 86.5% in Q1 2023 compared with 77% in Q1 2022, driven by a rise in major losses of over €30 million each, which totalled €1.035 billion.
Munich Re notes that the major loss figure include gains and losses from the run-off of major losses from previous years, with expenditure corresponding to 16.4% of net insurance revenue, so coming in above the long-term average expected value of 14%.
While man-made major losses fell from €170 million to €165 million, year-on-year, major losses from natural catastrophes rose to €870m in Q1 2023, compared with €448 million in Q1 2022. As a result of the earthquake in Turkey, Munich Re posted nominal losses of €600 million.
The reinsurer also released reserves of €314 million in Q1 2023 for basic losses from prior years, corresponding to 5% of insurance revenue.
Commenting on the April 1st reinsurance renewals, the company notes that it was able to increase the volume of business written by 11.1% to €2.9 billion.
“Non-proportional natural catastrophe business was expanded, in particular, in view of attractive rate levels. By contrast, Munich Re once again selectively discontinued business that no longer met risk/return expectations.
“Prices developed positively overall and for the most part more than compensated for the significantly higher loss estimates in some areas, which were caused primarily by inflation or other loss trends. To varying degrees, price increases were evident around the world. All in all, prices for the Munich Re portfolio increased by 4.7%. This figure is, as always, risk-adjusted. In other words, price increases are offset if they are associated with increased risk and, consequently, elevated loss expectations,” explains the firm.
“Munich Re expects the market environment to remain positive and to present attractive growth opportunities in the upcoming July renewal rounds,” it added.
In life and health (L&H) reinsurance, which generated a total technical result of €320 million, so up on last year’s €238 million, contribution to net result from release of the contractual service margin was in line with expectations, explains Munich Re.
Strong growth in new business more than offset the amount released, and the segment produced a net result of €291 million, and insurance revenue from insurance contracts issued of €2.7 billion.
Within its primary insurance ERGO business, Munich Re is reporting an improved net result of €219 million for Q1 2023, and an increase in insurance revenue from insurance contracts issued to €5 billion, driven by all segments. The ERGO P&C Germany segment made a strong contribution to the net result of €166 million, while the ERGO L&H Germany arm generated a net result of €41m, down on the prior year. ERGO International generated a net result of €12 million in Q1 2023 compared with €84 million in Q1 2022.
The total technical result for ERGO reached €561 million compared with €275 million a year earlier, with an operating result of €301 million.
On the asset side of the balance sheet, Munich Re has reported a Q1 2023 investment result of €1.6 billion, significantly higher than the €258 million seen in Q1 2022, driven by a significantly higher running yield as a result of higher interest rates.
“The earthquake that hit Turkey on the border with Syria in February 2023 was one of the most catastrophic we have seen in recent history. Around 60,000 people lost their lives. The insured losses amount to some €4–5bn, of which Munich Re is shouldering €0.6bn – one of the reasons why major losses from natural catastrophes in Q1 2023 were higher than expected,” said Christoph Jurecka, Chief Financial Officer (CFO).
“Owing to otherwise pleasing operational performance and a strong investment result, however, Munich Re generated a net result of almost €1.3bn. In addition, the April renewals saw Munich Re continue its trend of profitable growth. Accordingly, we are confident that we can reach our 2023 net result guidance of €4bn; the chances for us to surpass this target have increased,” he added.
Looking forward, Munich Re is targeting a net result of €4 billion for the 2023 financial year, but notes that all forecasts are subject to considerable uncertainty owing to fragile macroeconomic developments and volatile capital markets.
