Sculpture in front of the Munich Re reinsurance headquarters.
(Photo: picture alliance)
Munich Munich Re wants to achieve a consolidated profit of four billion euros for the first time in 2023. The reasons for this are the continued good development in the operating business and the conversion of the international accounting standards according to IFRS 17, which will be applied for the first time in the coming year. This was announced by the world’s largest reinsurer on Wednesday evening, immediately before the Dax group’s investor day on Thursday.
It is one of the largest conversion processes that the insurance industry has experienced in recent decades. With the introduction of the new accounting standards according to IFRS 17, there should be more transparency for investors. At the same time, complexity is likely to increase.
Among other things, IFRS17 regulates the valuation of insurance contracts, so that the figures should be more understandable for investors. Compared to the previous standard IFRS 4, which has been in force for decades, there are likely to be noticeable deviations.
Turnaround in interest rates inspires capital investment
At Munich Re, according to the new forecasts, this indicates a jump in profits to four billion euros for the coming year. In the current year, the group is aiming for 3.3 billion euros.
Top jobs of the day
Find the best jobs now and
be notified by email.
A second significant change in the accounting standard is insurance sales. Here, Munich Re expects 58 billion euros for the year 2023. The turnover is replacing the usual information on gross premium income. In the current year, the group plans with 67 billion euros.
Irrespective of the change in accounting, the group intends to earn more money with its own investments in the future. Mainly due to the turnaround in interest rates, the company’s own return on investment should be at least 2.2 percent in the coming year. Compared to the third quarter of the current year, that would be a significant increase, in the months from July to September it was only 1.6 percent.
The reinsurance segment is expected to contribute 3.3 billion euros to the new profit target of 4 billion euros. The remaining 700 million euros are planned as a profit contribution from the Düsseldorf primary insurance subsidiary Ergo. However, Munich Re pointed out that the new forecasts are still subject to change. Due to the Russian war of aggression in Ukraine, there are still considerable uncertainties.
Share soaring
In the operational business, it had already become apparent in the past few months that Munich Re had come through the year well despite the high burdens from natural disasters, war, pandemic and inflation. This has also been reflected in the share price development in recent weeks. For the first time in more than 20 years, the price climbed back above the 300 euro mark at the end of November.
Analysts still see potential and praised the robust business model, which has proven itself even in challenging times. For example, Hurricane Ian, which swept across Florida at the end of September, incurred losses of around EUR 1.6 billion for Munich Re. On Wednesday, Munich Re shares were listed with a slight daily loss of EUR 307.30.
More: Trend reversal for millions of life insurance policyholders: the year-long decline in interest rates is over