Munich Re has posted its results for the second quarter of 2023, revealing that the group is well on its way to achieving its annual target.
In line with the two new financial standards – IFRS 9 and IFRS 17 – Munich Re generated a profit of €1.154 billion in the quarter ending June 30, 2023, and a half year result worth €2.425 billion. The higher results in H1 2022 can be attributed to lower unwinding-of-discount effects and lower major-loss expenditure.
That said, Q2 featured strong business performance across both ERGO and reinsurance segments against the backdrop of a mixed macroeconomic environment. Insurance revenue from contracts issued surged on a YoY basis to post €14.175 billion in Q2, compared to €13.772 billion in the same period last year. Half year performance was also stronger at €28.448 billion versus H1 2022 at €27.033 billion.
Its total technical result fell slightly to €2.159 billion in Q2, while investment results rose to €596 million. Equity was also slightly higher at the reporting date at €27.436 billion versus the start of the year, when the firm posted €27.245 billion. Munich Re also confirmed that its solvency ratio remained above the optimum range at 273%.
Annualised return on equity (RoE) stood at 15.5% for the quarter, lower than the 24.2% posted for the same period last year. First half performance was also lower at 16.9% versus H1 2022 with 24.3%.
In total, the reinsurance division posted €904 million to Munich Re’s net result in the second quarter. For the half year, it amounted to €1.955 billion, a decrease from the previous €2.763 billion. The group attributed the decline to intentionally incurred losses from the disposal of fixed-interest securities in property-casualty reinsurance.
Munich Re did see better results for insurance revenue from insurance contracts in this line, as its figures rose to €9.3 billion in Q2 from €9.019 billion last year. Life and health reinsurance also generated a very strong result at €325 million, with Munich Re noting that the sector’s contribution was in line with its expectations. In total, the net result from the life and health reinsurance sector totalled €326 million.
Property-casualty reinsurance generated a net result of €578 million in this period, with insurance revenue rising to €6.695 billion. However, because of higher YoY expenditure for major losses, the combined ratio amounted to 80.5% of net insurance revenue.
Major-loss expenditure in Q2 increased YoY to €600 million from €464 million last year. Although man-made major losses fell by half to €155 million from €408 million, it was more than offset by major-loss expenditure from natural catastrophes, which increased to €445 million from €156 million. Munich Re cited the flooding in Italy as its costliest natural catastrophe, with losses amounting to €200 million.
The hardening market also meant slight decreases in the volume of business, with Munich Re reporting €3.6 billion in insurance renewals as of July 1. The reinsure said that it discontinued businesses that no longer met expectations with respect to prices, terms, and conditions.
In total, prices across the group’s portfolio rose considerably in the July renewals at +5.1%. However, Munich Re remained optimistic about favourable market conditions in January, the next round of renewals.
The group’s ERGO results generated €250 million in Q2 and €470 million in H1, both considerably higher than their 2022 counterparts. Insurance revenue rose to €4.875 billion for the quarter, while the half year saw it climbing to €9.916 billion.
ERGO International generated €116 million, more than four times its worth the previous year. ERGO Life and Health Germany, on the other hand, grew to €72 million.
ERGO property-casualty Germany, meanwhile, posted lower results at €62 million compared to 2022, which saw €149 million. In total, the technical result for the ERGO field in Q2 increased to €599 million, with total operating results also rising substantially to €350 million.
All in all, the group stated its confidence in meeting its targets communicated for 2023, which includes a net result of €4 billion for the financial year.
”Munich Re posted a profit of €2.4bn during the first six months of 2023 – considerably greater than half of our full-year forecast. All areas of our operation are contributing to our success. Munich Re continues to grow profitably because our clients value our strength, consistency and expertise. And we’ll keep on resolutely tapping into the encouraging market environment.
“In addition, we’re systematically making progress on decarbonisation in investments and insurance business and on fostering women leaders. Halfway through our Ambition 2025 strategy programme, it’s clear that Munich Re is fully on track to meet its targets,” Munich Re chair of the board of management Joachim Wenning said.
The group also recently posted its catastrophe report on the first half of 2023, which reveals a continuation of high catastrophe losses, although slightly lower than the previous year.
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