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

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

Question: William Fraser Hardcastle - UBS Investment Bank, Research Division - Analyst : You mentioned now that the inflation risk is particularly challenging on the back book in P&C. I guess how much comfort can investors take on the

Question: William Fraser Hardcastle - UBS Investment Bank, Research Division - Analyst : That's really helpful. Just one really quick follow-up. You mentioned the assets that will benefit from inflation, sensitive assets. Can you just maybe touch on those and whether any of that has already been benefiting through the P&L? Or are these sort of not mark-to-market through the P&L? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 09, 2022 / 12:00PM, MUVGn.DE - Half Year 2022 Muenchener Rueckversicherungs Gesellschaft in Muenchen AG Earnings Call Christoph Jurecka - Mnnchener Rnckversicherungs-Gesellschaft Aktiengesellschaft in Mnnchen - CFO & Member Management Board Yes. I mean the question you're asking is indeed a difficult one because timing differences are just huge. And from an economic performance already last year, we saw some positive performance of some of our inflation-linked nodes to give you one example, not immediately hitting the P&L, but positively contributing to economic earnings, that was last year. In the first half of the year, we realized some of them are of the realized gains, you particularly see on the fixed income side. If you look into our deck, a part of that is inflationary notes where we thought it would make sense to realize some of it without leaving our position unprotected. So wherever we realize some of that, we replace them by similarly sensitive assets, for example, inflation swaps or similar kinds of assets. So the overall protection level should be pretty similar. So yes, some of that did -- some of that entered into the P&L already, others didn't. And so there's also potential going forward. I think that's the answer generally.

Question: Kamran M. Hossain - JPMorgan Chase & Co, Research Division - Analyst : I've got 2 fairly big picture questions. So the first one, I guess, when you're talking about the Ambition 2025 target, it sounds like you're incrementally more positive on, I guess, the tailwinds. Now if I go back to the December 2020 slides and I look at the waterfall chart that you gave on going from the normalized 2020 return on equity to the 2025, 12% to 14%. I look at the moving parts in theory, they've all improved. So in terms of kind of what's going on there, at what point do you think it will be time to update that guidance for the 2025 return on equity? So that's question one. The second question is coming back to the comments around the market, where again you sound very positive, particularly for January, which makes sense given everything that's gone on in the world. However, given kind of the risk backdrop, margin expansion looks pretty weak. 0.1% is understandably conservative, but still, it doesn't seem that's exciting, particularly compared to other kind of recent periods in the market. So why are you still very positive on the market? And why do you think things are improving if maybe the numbers that you're suggesting don't really kind of give that much support? Joachim Wenning - Mnnchener Rnckversicherungs-Gesellschaft Aktiengesellschaft in Mnnchen - Chairman of the Management Board This is Joachim. Thanks for your questions. Let me start with the second one. You're right in stating that 0.1% looks like pretty marginal. It's close to 0, it looks flattish. That's right. So why are we positive? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 09, 2022 / 12:00PM, MUVGn.DE - Half Year 2022 Muenchener Rueckversicherungs Gesellschaft in Muenchen AG Earnings Call First of all, we were positive already at the level of the rates last year before we went into the renewals. And then given that there is a loss development and increasing loss development and that there is inflation, which further drives losses upwards seeing that the market fully compensates for those increased inflation assumption, but fully and fully our conservative assumptions, that's very good news because if you think about it, it could also have been realistic almost that you say the market will try to catch up with inflation, but does that in 1 or 2 or 3 steps. This has happened in 1 big step, this we consider a positive. And with regard to your first question, Ambition 2025, is it already time to reconsider or review our ROE ambition of 12% to 14% for 2025. I have to say. First of all, we are in 2022, and there is still time to go into 2025. So already timing-wise, it will be too early to reconsider this either up or either down. And secondly, we told already back in 2020 that the key driver towards 14% ROE would be our capital management, would be dividend payments and would be share buybacks. So with no dividend increases and share buybacks, it will be difficult to even reach 14%. So I would just comment it at this point, like the following: growth and rate development in P&C reinsurance have given us tailwind that we move more comfortably in that range, but we don't review it.

Question: Teik L. Goh - RBC Capital Markets, Research Division - Analyst : Two short questions, please. The first one is just on Risk Solutions. Could you maybe comment on the growth and combined ratio performance for the first half, please? And my second question is just back to the July renewals. If I look at the bubble chart on Slide 8, it looks like you've grown quite strongly in property cat. Is there any more color you can add maybe things like apparel or the region or client types? Christoph Jurecka - Mnnchener Rnckversicherungs-Gesellschaft Aktiengesellschaft in Mnnchen - CFO & Member Management Board Yes, I'll start with the Risk Solutions question. As you know, we are not releasing combined ratio numbers for subsegments during the year. So therefore, I can only mention that I think the profitability is fair to say that it develops absolutely in line with our expectation. But more precise number is something we can only give at the end of the year. Growth wise, we see substantial growth more or less across all the units there. And I don't think there's any specific entity I'd like to highlight particularly here. But growth-wise, and I think Joachim also mentioned that in his introduction, we are very happy also with the development of the Risk Solutions business. Joachim Wenning - Mnnchener Rnckversicherungs-Gesellschaft Aktiengesellschaft in Mnnchen - Chairman of the Management Board With regard to the other question, the July renewals, you're referring to the property XL renewal. And where they're coming from, right? They are pretty much coming worldwide. A big chunk North America, but also from Far East and Latin America. So pretty much widespread.