©Munich Re.
Munich Re released its full 2023 earnings report, which showed strong performance by the European “big four” reinsurer.
The company’s total technical result in the 2023 financial year rose to €7.545 billion compared to €7.070 billion in 2022.
It specified that the investment result increased to €5.374 billion compared to 2022’s €2.983 billion.
This, it said, was mainly due to currency losses against the Japanese yen and the US dollar. The currency result fell considerably to –€292 million - €1.067 billion in 2022. Conversely, high currency gains were generated in 2022 chiefly against the US dollar.
Regular income from investments increased to €6.950 billion compared to €6.358 billion in 2022, which was primarily attributable to higher interest rates.
The balance from write-ups and write-downs was –€194 million, with the balance from gains and losses on the disposal of investments coming to –€588 million (3.755 billion).
This figure was -€2.811 billion in 2022. The change in fair value amounted to –€65 million compared to 2022’s –€3.649 billion. Whereas Munich Re profited from high interest rates in 2023, the previous year had been impacted by substantial interest-rate hikes.
The 2023 investment result represents a return of 2.5% on the average market value of the portfolio. The running yield was 3.2%, and the year-end yield on reinvestment was 4.5%.
“We expect the Group’s insurance revenue to total €59 billion and the return on investment to improve markedly, surpassing 2.8%."
As at 31 December 2023, the equity-backing ratio including equity-linked derivatives amounted to 3.7%. This was 2.0% in 2022. The carrying amount of the investment portfolio as at 31 December 2023 was €218.462 billion compared to 2022’s €207.965 billion.
The company said was aiming to generate a net result of €5 billion in 2024. “We expect the Group’s insurance revenue to total €59 billion and the return on investment to improve markedly, surpassing 2.8%,” it said.
The company’s release specifically called for more industry cooperation and work on combatting issues from more frequent extreme weather events, which are affecting insurers.
“With the exception of systemic risks – such as cyber – our appetite for covering existential risks for people and enterprises is far from exhausted.”
“The rising incidence of extreme weather resulting in high losses continues,” it said. “Prices for cover must be appropriate in order to create incentives for better preventative measures. Superior prevention can substantially reduce the losses caused by extreme weather events, in turn easing the financial burden on society. Governments can exert a positive influence on insurability and the price for insurance cover by way of state-mandated preventative measures.”
The risk was further highlighted by Joachim Wenning, Chair of the Board of Management, in his statement on the company’s earnings. “With the exception of systemic risks – such as cyber and pandemic – our appetite for covering existential risks for people and enterprises is far from exhausted.”
Munich Re’s competitor, Swiss Re, released its ad hoc results for 2023 last month, which saw the company achieve a return on investments (ROI) of 3.4% for 2023, with recurring income yield increasing to 3.9% in the fourth quarter.
It was also warned by Fitch Ratings last month that, along with the rest of the ‘big four’, its January 2024 renewals showed that their underwriting margins were close to peaking as supply-and-demand dynamics become more balanced.
“We expect strong underwriting profitability to continue supporting the reinsurers’ ratings this year, with price levels and favourable terms and conditions adequately compensating for high claims inflation,” said Manuel Arrive, Director, Insurance at Fitch Ratings, in the report. “Investment income will continue to bolster earnings as reinvestment yields are still above average portfolio yields.”
