Muenchener Rueckversicherungs Gesellschaft AG in Muenchen Outlook for 2020 and 2021 Call Transcript

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

Question: Kamran Hossain - RBC Capital Markets - Analyst : A couple of questions. One is on, I guess, the combined ratio for next year. You were aiming for 97% underlying this year. You've said the combined ratio X COVID next year should look like 95%. Is there anything else going on apart from best pricing? So, that's question one. Does that bake and high reserve releases, etc.? And the second part of that question is, assuming that you've got this 95% as a starting point for 2021 with improving 1/1 renewals, should we expect the quantum of improvement in the following year to be similar? The second question is just on, I guess, claims at this stage. I mean, it is a remarkably high level of IBNR that you've got for your COVID-19 claims. How does that compare with your book in a normal year? I know there's no such thing as a normal year, but how does that compare to your book in the first year view? Thank you.

Question: Andrew Ritchie - Autonomous Research LLP - Analyst : I just wanted to understand a bit more about the increase in COVID nonlife claims in Q4. I guess I'm not sure how to interpret the paragraph on slide 2 with respect to BI which says, our reserving follows our legal assessment on a case-by-case basis. Meaning that if court decisions -- that paragraph there. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 01, 2020 / 12:00PM, MUVGn.DE - Muenchener Rueckversicherungs Gesellschaft AG in Muenchen Outlook for 2020 and 2021 Call I don't know, does that mean though that you have or have not reflected court decisions that have emerged since the end of Q3, which I guess is predominantly two jurisdictions? Or are you still holding out that your legal opinion is different and that ultimately those court decisions may get reversed? That's why I'm not sure what you mean by that paragraph. If you could clarify that and what happened on BI reserves in Q4 and what the assumption is for 2021. And the second question is a simple one I think -- or maybe not. The technical result guidance for life for 2021 is EUR400 million after EUR200 million of expected COVID, so a EUR600 million kind of underlying run rate, I suppose, which is higher than the EUR550 million which was the original guidance. Is that just natural growth of the business? I'd assumed in 2021 there would still be some low rate effects, particularly in Canada where you have seen some noise from that. But maybe just clarify why that isn't the case. Thanks.

Question: Andrew Ritchie - Autonomous Research LLP - Analyst : And there's no more Canadian drag effect on -- I think there was a change in discount rate I think was the effect this year.

Question: Jochen Schmitt - Metzler Equities - Analyst : Thank you, good afternoon. I have one question on the outlook for reinsurance premium income of EUR37 billion in 2021. Would it be reasonable to assume that the sales non-proportional business is likely to increase whether it's in your nonlife reinsurance book in 2021? That's my question

Question: Vinit Malhotra - Mediobanca - Analyst : Thank you very much for this opportunity. So, my two questions -- first one is just on the Solvency II. Because now we have two quarters where the COVID losses are coming out a bit worse than what we could have imagined or what was initially thought. And I remember you talked about the aggregator on top kind of buffer or bulk reserve buffer, meaning that no effect is needed on Solvency II. But are you -- is there any update on that thinking? Is it that -- because what it looks like is that Solvency II buffers are then a bit lower because obviously they are being used to provide backup on COVID. Any update on that given that COVID has surprised negatively two quarters? First question. The second question is I noticed also the pickup in ROI in fourth quarter while full year being 3% and nine months was 2.7%. Could you just comment on what's happening there? The gains might have been realized. And also will that hamper more the investment deal in the future?

Question: Vinit Malhotra - Mediobanca - Analyst : And also I meant P&C and life, sorry, just to be clear. I didn't mean life only, sorry.

Question: Vikram Gandhi - Societe Generale - Analyst : Just one from my side. I'm just trying to think how should we really see the EUR2.8 billion figure next year in context of what the original guidance or the target for FY20 was, which is exactly EUR2.8 billion the pre-COVID world? And next year you kind of expect EUR500 million additional COVID impact pretax, so that's about EUR400 million post-tax and ERGO is about EUR0.5 billion post-tax impact from COVID. So, that's being offset by something. And it appears to me that clearly it cannot just be the organic growth and the better pricing. So, there has to be a bit more explanation. But perhaps I'm wrong. So, all I'm trying to say is does it mean the EUR3.3 billion is the new base for the Group's earnings power? That's my simple question. Thank you.

Question: Michael Haid - Commerzbank - Analyst : Two questions on ERGO. First 2021 and 2020. 2021 you had a negative impact of EUR100 million. What assumptions did you take on or expectations? What did you take on motor insurance globally? Presumably many insurance companies have seen frequency benefits, so competition may increase. And so, I just wondered how did you arrive to the minus EUR100 million. And similar for 2020 the minus EUR65 million, where does it really come from? It's investment income and how do frequency benefits play into that?

Question: Thomas Fossard - HSBC - Analyst : First question would be on the EUR200 million of additional contingency claims you expect in 2021. Could you remind us on which basis or which assumptions you formulated the EUR200 million? And if potentially this is now taking into consideration events which actually could duplicate (inaudible) place if the vaccine is -- or what sort of prudence are you taking into this EUR200 million? And the other question would be related to the claims environment quarter to date. There is still one month to go, but maybe you could maybe qualify how the quarter has been so far. Thank you.

Question: Michael van Wegen - BofA Merrill Lynch - Analyst : Two questions, please. First is basically a follow-up on the previous question about the large losses. When I try to back solve the 2020 106% combined ratio and the 97% underlying and taking into account your COVID guidance, then indeed either October-November have been very benign and I think there's an element of that that you just highlighted. But it also suggests that PYD could be considerably higher than we perhaps have seen in Q4, so in prior years. Can you help me understand a little bit -- well, A, if that's a correct assessment; but, B, what would be driving substantially higher PYD versus other years Q4, which tends to be seasonally a bit higher? And the second question -- it's been very helpful the disclosure you've provided on COVID losses by category for the full year. But can you help a little bit understand what happened in Q4? Because the EUR900 million or so P&C Re COVID losses are the highest quarter year to date. I'm just trying to understand to what degree a second wave is a material contributor to that or which categories from the first wave are very important to that. And why did it take relatively long for that to come through since the start of the pandemic? Thank you.

Question: Michael van Wegen - BofA Merrill Lynch - Analyst : Okay, thank you. And is that related to any particular area within the COVID exposures or just across the board where you saw that potential strengthening of reserves?

Question: Paris Hadjiantonis - Exane BNP Paribas - Analyst : A couple of questions from my side. Firstly, Christoph, thanks for the detail on the split of the COVID losses. But I would be asking again on contingency and specifically on a world I understand to be probably your largest exposure, which is the Olympics. I assume from what you said before that the assumption is that such an event will be taking place but without spectators. Is that the case? And if we get a complete cancellation, I think you've talked about this before, but can you give us an idea of how the level of contingency claims changes for 2021? And then secondly, on the dividends, you don't provide detail today. Let me ask you -- given your discussions or your regular discussions with the regulators, are you at all concerned that (inaudible) might be stricter this year than before? Or is your Solvency II position and your ability to withstand shocks the only thing that matters to them? Thank you.

Question: Darius Satkauskas - Keefe, Bruyette & Woods - Analyst : So, question one, in the few percentage points combined ratio improvement, can you give some color how much you are assuming from better pricing and what are your latest views on the January renewals? Second question, you might not be able to comment on this, but maybe you could give some color. So, Munich Re has a history of being conservative. However, you are guiding to 2 percentage points combined improvement when most of your peers are talking about 1 percentage point. Do you think you are more optimistic about the pricing improvements or our peers are simply building more prudence in their loss specs? Any explanation there? Thank you.