Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Munchener Ruckversicherungs-Gesellschaft AG (MURGF, Financial) reported a strong net result of EUR 3.8 billion for the first half of 2024, well on track to meet or exceed the full-year target of EUR 5 billion.
- The life and health reinsurance business posted an excellent total technical result, almost achieving the full-year guidance within six months.
- ERGO, the primary insurance segment, continues to be a reliable earnings contributor, with a net result of more than EUR 500 million, well on track to meet its full-year guidance.
- The company is reinvesting new money at more than 4.5%, which will further increase the running yield, benefiting from favorable capital markets.
- Munchener Ruckversicherungs-Gesellschaft AG (MURGF) is well above the upper end of its targeted return on equity range of 14% to 16%, indicating strong financial performance.
Negative Points
- The overall volume of the July renewal book decreased by more than 5% due to selective reductions in casualty lines where rate increases were not adequate.
- The combined ratio for property casualty reinsurance is expected to be higher in the second half of 2024 due to business mix changes, particularly in motor business.
- The life and health reinsurance business has a slightly lower CSM release trajectory, trending down from around 8% to closer to 7%, due to a shift in business mix.
- ERGO's German P&C segment posted a low Q2 net result of EUR 19 million, affected by higher than expected major losses and loss assumption changes in motor business.
- The company remains cautious and mindful of the hurricane season ahead, which could impact the financial targets for the year.
Q & A Highlights
Q: With the solvency level and earnings momentum year to date, how should we think about the scope for capital returns for this year? Is the 75% payout ratio a good starting point?
A: Our commitment is clear that with higher earnings, there will be higher repatriation. However, final decisions on capital repatriation will be made at year-end and announced in the first quarter of next year. Given our earnings level, repatriation numbers will necessarily go up.
Q: Can you share additional thoughts on the performance of the Global Specialty Insurance (GSI) unit in terms of premium growth and underwriting profitability?
A: In Q2, GSI earnings were not as good as in Q1 due to nat cat-related losses. However, premium growth is on target, and we expect to achieve a EUR10 billion top line by the end of 2025, which would mean a 25% increase compared to the end of 2023.
Q: Regarding the July volume reduction in casualty, is this a reaction to adverse data or purely a pricing decision?
A: The reduction in casualty volumes was not a reaction to adverse data but a response to not finding enough profitable business opportunities. We chose to step away from business where terms were unattractive.
Q: Why haven't you moved up the life and health guidance despite strong performance?
A: The guidance remains unchanged due to the overall cautious approach ahead of the hurricane season. There is no indication of any drag on earnings in the second half of the year, but we prefer to remain conservative.
Q: Can you elaborate on the US mortality development and its impact on life and health reinsurance?
A: The positive experience in US mortality has been a significant driver of the overall positive experience. We have seen two quarters in a row with positive US mortality experience, which is a pleasing development.
Q: What is the impact of the shift from casualty quota share to excess loss on the underlying combined ratio for 2025?
A: The shift is incorporated in our guidance, and while it may have an impact, it is not material enough to significantly alter the overall combined ratio. The guidance remains below 82% for the full year.
Q: What are your current views on the cyber insurance market given the weaker primary rates?
A: The cyber insurance market is growing double-digit, and the need for cyber insurance is increasing. While primary rates have slowed down slightly, our volume cuts in 2024 were due to a firm stance on terms and conditions, particularly regarding systemic cyber risk exclusions.
Q: Can you provide an update on the PMLs for cyber and nat cat scenarios?
A: The cyber PML is lower than EUR3 billion and has been reduced due to the implementation of war exclusion clauses. The nat cat PMLs remain stable or slightly lower, driven by FX developments.
Q: Why was the standalone discount rate for P&C reinsurance so high in the quarter?
A: The discount rate depends on market interest rate developments and the distribution of losses between basic and large losses. Higher levels of large losses, which have longer payout durations, can result in a higher discount rate impact.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
