Munich Re lifts guidance on lower major losses, despite €200m Maui wildfire hit

Munich Re has delivered another very strong quarter of results, helped by major losses and natural catastrophe costs coming in below expectation, which has enabled the reinsurance giant to lift its profit guidance for the full-year.

This is despite the company taking a relatively significant share of losses from the Maui wildfires in Hawaii, which it estimates cost it €200 million, as the costliest natural catastrophe for Munich Re in Q3.

A key headline for Munich Re at the end of the quarter is higher excess-of-loss pricing for natural catastrophe reinsurance, which is helping to drive results for the company.

While the third-quarter of 2023 was marked by the Maui wildfires and a number of severe weather events in Europe, for Munich Re the total for major losses from natural catastrophes dropped to €535 million, down significantly on the hurricane Ian affected €1.675 billion from a year earlier.

Overall major loss expenditure, including non-nat cat losses, settled at 11.7% of net insurance revenue, down from the prior year’s 30.8%.

That equated to €770 million of major losses, down from €2.134 billion, resulting in a combined ratio of 82% for Q3 and 83% for the first nine months of the year.

Life and health reinsurance also delivered a technical result exceeding the pro-rata guidance, helping Munich Re achieve a net result for Q3 2023 of €1.169 billion.

As a result, the company has lifted its full-year guidance for 2023, believing it is “well positioned to surpass the previous annual target of €4 billion,” and so it has been raised to €4.5 billion.

Overall, the company forecasts around €3.8 billion of profit for its reinsurance business, up from around €3.3 billion.

Part of the reason is an improved combined ratio expectation, meaning higher priced business will drive more profits in P&C reinsurance for Munich Re, with the firm now anticipating a combined ratio of 85%, better than the previous forecast for 86%.

Christoph Jurecka, CFO, commented on the performance, “Munich Re’s outstanding business performance continued seamlessly in the third quarter. Unlike last year, we benefited from a comparatively mild hurricane season in the North Atlantic. Accordingly, major-loss expenditure in property-casualty reinsurance was lower than expected, despite various other natural catastrophes. Strong performance in our other operating segments rounded out the positive results.

“Ultimately, we can report a net result of nearly €1.2bn for the third quarter and €3.6bn for the first nine months of the year. We are confident that we will surpass our previous annual target of €4.0bn and have raised the guidance to €4.5bn.”