Forecasts & Results

Munich Re 1Q22 trading statement

Posted 10/05/2022 – Quick takes

Munich Re has today released its 1Q22 trading statement.

The highlights of the statement were as follows:

  • The group reported a net profit of €608m in 1Q22 (vs. €589m in 1Q21) and an operating profit of €780m (vs. €798m in 1Q21);
  • The group reported strong organic growth across all segments, especially in P&C reinsurance;
  • Group gross written premiums (GWP) increased by 15.7% year-on-year to €16,833m (vs. €14,551m in 1Q21);
  • April renewals produced further premium growth (+7.6%);
  • 1Q22 profitability was helped by below-average major losses in Property & Casualty Reinsurance (P&C Re), resulting in a P&C Re combined ratio of 91.3% (vs. 98.9% in 1Q21);
  • P&C Re reported a 1Q22 operating profit of €589m (vs. €358m in 1Q21) with GWP increasing to €7,938m (vs. €6,330m in 1Q21);
  • The group announced Ukraine reserves of slightly over €100m across some of its Specialty lines, nearly all of which is IBNR.
  • 1Q22 major-losses were c9.2% (vs. 15.5% in 1Q21) of net earned premiums, below the long-term average of 13%. Man-made major losses declined to €185m (vs. €247m in 1Q21); major losses from natural catastrophes were €481m in 1Q22 (vs. €646m in 1Q21) including heavy rainfall in eastern Australia (c€440m) and the winter storms in Europe (c€120m);
  • Group investment result decreased to €987m (vs. €1,691m in 1Q21).
  • Group solvency ratio c231% (vs. 227% as at 31-Dec-21) vs. optimum range of 175–220%;
  • Group RoE for 1Q22 9.8% (vs. 10.4% in 1Q21).

Christoph Jurecka, group CFO, said: “ … The financial consequences of the war [in Ukraine] and the sanctions severely impacted our result in the first quarter: We made write-downs for impairment losses on Russian and Ukrainian bonds alike and recorded the first claims. Despite the uncertainties of a challenging environment, Munich Re maintains its annual guidance of €3.3bn based on a quarterly profit of more than €600m.”

Alpha comment

Munich Re’s 1Q22 P&C Re operating profit and combined ratio are encouraging and reflect comments by other global insurers that 1Q22 was relatively benign for both natural catastrophe and man-made losses. The Ukraine loss number is perhaps lower than we might have expected, but again there seems to be little market consensus on how to reserve for potential losses from the leased aircraft stranded in Russia. Clearly the investment income number is disappointing, but not surprising given write-downs on Russian and Ukrainian bonds (€370m) and rising global interest rates which have impacted shares and bonds. There was little detail on the rate growth seen in 1Q22 nor the reasons for GWP growth in excess of rate growth.

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