Insurance revenue from insurance contracts issued dropped slightly y-o-y to EUR 14,460 million in Q3; for 9M, the figure increased to EUR 42,908 million, 3% up y-o-y. The total technical result climbed to EUR 2,221 million in Q3 and the investment result rose to EUR 760 million. The currency result was EUR 309 million, in particular owing to exchange gains against the US dollar. The operating result rose to EUR 1,776 million, from EUR 1,343 million in 9M2022 and the effective tax rate was 32.6% (15.1%).
Equity was slightly higher at the reporting date (EUR 27,647 million) than at the start of the year (EUR 27,245 million). The solvency ratio was approximately 271% (260% as at 31 December 2022), which is considerably above the optimum range (175–220%).
In Q3 2023, annualized return on equity (RoE) amounted to 15.8% (16.4%); the RoE for 9M was 16.5% (21.6%) – with both figures at the upper end of the RoE target range of 14 to 16% specified in the Ambition 2025 strategy program.
Reinsurance: Result of EUR 995 million
The reinsurance field of business contributed EUR 995 million to the Group’s net result in Q3; the 9M result was EUR 2,950 million. Insurance revenue from insurance contracts issued declined to EUR 9,456 million in Q3. The total technical result rose to EUR 1,626 million, while the operating result rose to EUR 1,495 million.
Life and health reinsurance generated a total technical result of EUR 440 million in Q3. The contribution to the net result from the release of the contractual service margin was in line with expectations. Strong growth in new business more than offset the amount released. The net result declined to EUR 351 million (542m) y-o-y, the result in Q3 2022 having been driven by substantial currency gains. Insurance revenue from insurance contracts issued declined to EUR 2,610 million (2,800m) due to currency translation effects.
Property-casualty reinsurance generated a net result of EUR 644 million in Q3. Insurance revenue from insurance contracts issued declined y-o-y to EUR 6,845 million, owing in particular to a one-off effect in Q3 2022. The combined ratio amounted to 82.0% of insurance revenue (net) for Q3 and 83.0% for 9M. The normalized combined ratio was 85.5% in Q3.
Major-loss expenditure declined y-o-y to EUR 770 million, from the 2.13 billion recorded the previous year, particularly affected by Hurricane Ian. These figures include gains and losses from the run-off of major losses from previous years. Major-loss expenditure corresponded to 11.7% of insurance revenue (net) and was thus below the long-term average expected value of 14%, both for Q3 and for 9M (12.5%). Man-made major losses fell to EUR 235 million from 460m in 9M 2022, while major losses from natural catastrophes dropped to EUR 535 million (1,675m). These major loss figures take account of the effects of discounting and risk adjustment. The costliest natural catastrophe for Munich Re in Q3 was the wildfire on Maui (Hawaii), with losses amounting to some EUR 200 million (nominal value).
In Q3, reserves of EUR 333 million (330m) were released for basic losses from prior years, corresponding to 5.1% (4.8%) of insurance revenue (net). Munich Re continually seeks to set the amount of provisions for newly emerging claims at the very top end of the estimation range so that profits from the release of a portion of these reserves can be generated at a later stage.
ERGO: Result of EUR 173 million
Munich Re generated a profit of EUR 173 million in its ERGO field of business in Q3 and EUR 643 million in 9M. Insurance revenue from insurance contracts issued rose substantially to EUR 5,004 million in Q3; in 9M, the figure increased to EUR 14,920 million.
ERGO International generated a very good net result of EUR 90 million (–73 million) in Q3. This was due in part to favorable claims development, despite natural catastrophe losses in Greece. In addition, continued growth in among others international health and Polish property business, together with a release of the contractual service margin in line with expectations, contributed to ERGO’s performance.
ERGO Life and Health Germany generated a net result of EUR 52 million in Q3, driven in part by a release of the contractual service margin from long-term personal lines insurance that was in keeping with expectations. In addition, short-term health business and travel business boosted the result. The result in Q3 2022 had benefited from one-off effects.
The ERGO Property-casualty Germany segment contributed EUR 31 million to the Q3 net result. Strong operational performance was negatively offset by natural catastrophe losses and a weak investment result. Q3 2022 had been shaped by favorable major claims experience.
The total technical result for the field of business rose to EUR 595 million in Q3, while the operating result amounted to EUR 281 million. In Property-casualty Germany, the combined ratio was a pleasing 88.2% (80.6%), despite high natural catastrophe losses, and was 85.8% (87.2%) for 9M. In the ERGO International segment, the ratio fell considerably to 87.9% (114.8%) in Q3 thanks to favorable developments in claims and costs. The ratio for 9M was 90.3% (97.2%).
Investments: Investment result of EUR 760 million
Munich Re’s investment result increased to EUR 760 million in Q3. Regular income from investments climbed to EUR 1,797 million, primarily due to the continued rise in interest rates. The balance from write-ups and write-downs was –EUR 26 million and the balance from gains and losses on the disposal of investments came to –EUR 196 million. The fair value change was –EUR 579 million. The above-mentioned losses from the disposal of investments chiefly concerned fixed-interest securities, which were sold for the purpose of reinvesting and thus more quickly benefiting from the higher interest rates currently available.
Overall, the Q3 investment result represented a return of 1.4% on the average market value of the portfolio. The running yield was 3.3% and the yield on reinvestment was 4.5%. As at 30 September 2023, the equity-backing ratio including equity-linked derivatives amounted to 3.2% (2.0% as at 31 December 2022). The investment portfolio totaled EUR 209,957 million as at 30 September 2023.
Outlook for 2023: Annual profit expectation raised
Munich Re is well positioned to surpass the previous annual target of EUR 4 billion. Accordingly, it has now raised the annual guidance for its 2023 net result to EUR 4.5 billion.
In the reinsurance field of business, Munich Re now anticipates a profit of around EUR 3.8 billion (previously around EUR 3.3 billion) and, due to currency effects, insurance revenue of around EUR 38 billion (previously around EUR 39 billion) for the 2023 financial year. In life and health reinsurance, a total technical result of around EUR 1.4 billion (previously around EUR 1.0 billion) is expected. In property-casualty reinsurance, Munich Re is anticipating a combined ratio (net) of 85% (previously 86%). In the ERGO field of business, insurance revenue is projected to be around EUR 20 billion (previously around EUR 19 billion). All other expectations for 2023 remain unchanged compared with the figures presented in the 2023 Half-Year Financial Report published in August.
All projections and targets are subject to increased uncertainties stemming from geopolitical and macroeconomic developments. Further, they are contingent on major losses remaining within normal bounds, and on the income statement not being impacted by severe fluctuations in the currency or capital markets, significant changes in the tax environment, or other one-off effects.
* Since 1 January 2023, Munich Re has been preparing and communicating financial data in accordance with two new financial reporting standards: IFRS 9 and IFRS 17.1
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