Global reinsurance giant Munich Re has released new profit guidance under IFRS 17, with the new accounting regime lifting figures materially, but analysts believe the hard market will also be a significant factor in the Enro 4 bn target for 2023.
At that level, the reinsurance segment guidance for 2023 is higher than Munich Re’s group profit target for 2022.
At the same time, the property-casualty reinsurance combined ratio is forecast by the reinsurer to improve significantly to around 86%, another metric that higher premiums will be driving as well as the new accounting disclosures ubder IFRS 17.
Overall, for the Munich Re group businesses, insurance revenues for 2023, so the IFRS 17 item that will supersede “premiums” in accounts, are expected to reach around Euro 58bn.
While Munich Re notes considerable uncertainty around the forecasts, due to geopolitical and economic factors, plus the “unclear future of the pandemic,” analysts seem sure that there is a good deal of higher pricing and as a result premium growth embedded in these forecasts.
J.P. Morgan analysts noted that “At this stage it is difficult to compare the new profit targets under IFRS 17 to the old basis on which the 2022 target was set.”
But add, “However, we would emphasise that, based on IFRS 17 presentations from similarly diversified companies, in most cases profits have perceived to look similar under the new regime to the old IFRS 4 basis.
“Therefore, we see this new profit target as being positive 1) as it supports the sharp improvement in consensus expectations year on year 2) Munich Re has historically been cautious when providing earnings guidance.”
This “sharp improvement in consensus expectations” is driven by the hardening of the reinsurance market, driving an expectation of better conditions and results for companies like Munich Re in 2023
