Full Year 2022 Muenchener Rueckversicherungs Gesellschaft AG in Muenchen Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Kamran M. Hossain - JPMorgan Chase & Co, Research Division - Analyst : Two questions from me. The first one is just on the -- I guess, on the prices and renewals. Clearly, I have heard your comments around kind of what peers are saying versus what you are saying. But the [2.3%] even on your basis feels pretty cautious, prudent versus history, and if I had to look back at 2021, you're actually above that level 2.4% Jan '21 renewals. So should we look at these renewals and think, okay, you've made very prudent risk adjustments. Are we talking kind of further special inflation reserve type prudence or just kind of regular [Munich] prudence? So just interested in comments around that because it feels like it's a really good market, but 2.3% doesn't necessarily suggest that. I thought it's good, but it's not great. And the second question is on dividend growth and capital returns. Clearly, you're aiming for EUR 4 billion of earnings this year. And obviously, we're very early in the year. But if you were to achieve that number, should that flow straight through to local GAAP earnings, and therefore, theoretically, can it all be distributable? Joachim Wenning - Mnnchener Rnckversicherungs-Gesellschaft Aktiengesellschaft in Mnnchen - Chairman of the Management Board Yes, Kamran. This is Joachim. I take the first question, Christoph, takes. So is the 2.3% rate increase that we indicated prudent, is that overly prudent? Is that good? Well, I can tell you, we haven't seen renewal like this one, if you just give us credit. Second, that this is the overwhelming perception of business selling. Now you can say they are (technical difficulty). Now the 2.3% if you compare it as you did and rightly so, you compare it to some other January renewal outcomes, then I would say it's maybe underwhelming because we have seen one, it was, I think (technical difficulty). However, we didn't have inflation (technical difficulty) then we get a full compensation (inaudible) for a book of EUR 15 billion to (technical difficulty). Technically, that is a matter of fact, and I would agree with you, but you get all of that funded -- funds not over 1 or 2 or (inaudible) that's a big achievement and to get in addition to the 2.3%, frankly, it's 2.3%. These are amounts I wouldn't underestimate. Are we still conservative or more conservative than before? Maybe, but I would be cautious, maybe our inflation assumptions are on the cautious side, but frankly, I love them to be on the caution side (inaudible). This will be my long answer. Thank you. Christoph? Christoph Jurecka - Mnnchener Rnckversicherungs-Gesellschaft Aktiengesellschaft in Mnnchen - CFO & Member Management Board Sure, Kamran. So the local GAAP results can only be structurally lower than IFRS. I think you're well aware of that. The reason is that we are not always able to upstream all of our earnings to the mother company based on local capitalization requirements given the growth in subsidiaries and branches and similar things. But what I can confirm is that the local GAAP earnings will be, for sure, high enough that together with the stock REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 23, 2023 / 1:00PM, MUVGn.DE - Full Year 2022 Muenchener Rueckversicherungs Gesellschaft AG in Muenchen Earnings Call of distributable earnings we are holding already on group level, they will be, in any case, sufficient not to be any relevant restriction to continue to have an attractive capital management policy also going forward.

Question: William Fraser Hardcastle - UBS Investment Bank, Research Division - Analyst : First of all, regarding that current year inflation uplift, I guess, what lines of business has seen the highest allocation? How long are you assuming inflation stays elevated in this uplift? And should we a portion is relatively evenly across the quarters in 2022. I know it's all coming in Q4, but -- or has that shortfall or possible shortfall been increasing as the years progressed? And the second question is just related to January renewals. It might sound a bit cheeky, but I guess why have you not growing volume more? It's a hard market, peers were constrained. You got better margin here. Is it because you're expecting even better later renewals? Or was it simply primary demand reduced so much? Christoph Jurecka - Mnnchener Rnckversicherungs-Gesellschaft Aktiengesellschaft in Mnnchen - CFO & Member Management Board Yes. Well, on the inflation, I think what is very important to underline that the outcome we are booking in Q4 is really the result of an in-depth analysis in our annual reserve review. So it's not something which is obvious, and we could have booked early on already. And why is that? Well, the reason is we don't see it in our data at all yet. There are just very few lines of businesses where we actually have increased claims already. So what we had to do is have a detailed database analysis our actuaries have been running over the last couple of months in order to find out what the potential impact from the higher inflation is on our books. And the way we did it is twofold. We started into the exercise from a more top-down perspective based on CPI, but also other inflation numbers available in inflation indices and these kind of things, and started with the top-down assessment, what they might -- those indices might mean for our reserves, but then very much went into the details of each and every book we are holding together with the underwriters understanding in reality what inflation might mean for those books also looking into the terms of conditions on the individual treaty in a very detailed way. And then coming up with a number like that, what inflation would mean to those books and then we were only in a position to book it. And the difficult and the risky thing is if you don't do an exercise like that, you could easily be on the wrong foot and not book anything at all. And then you'll find out 1, 2, 3 years later, maybe that the claims is a surprisingly high for you. And that's why we are underlying -- underlining so much that this exercise was very important. It was important to have this thorough assessment of inflation. And also this prudent stance we have on inflation is something really based on data and based on the intelligence of a whole organization after 2 or 3 months exercise going into all the details.

Question: William Fraser Hardcastle - UBS Investment Bank, Research Division - Analyst : That's a lot clearer. So just to be clear, are you able to say what line of business that was in? Or is it a whole account sort of multi-facets at large? Joachim Wenning - Mnnchener Rnckversicherungs-Gesellschaft Aktiengesellschaft in Mnnchen - Chairman of the Management Board Your estimate is right. And there is 1 risk area where recently, I think, already made a public statement that they retained some of the business that the reinsurers didn't want that exactly us.