Muenchener Rueckversicherungs-Gesellschaft in Muenchen AG to Discuss Earnings Outlook 2025 Call Transcript

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

Question: Kamran Hossain - JPMorgan Chase & Co - Analyst : Hi, morning and season's greetings. Two questions for me. The first one is just on the I guess on the new disclosure around GSI and P&C reinsurance and the combined ratios. Just interested in you know, I guess at the group level, we can see that you've moved from 82% to 83% and I understand your comments around prudence, around volatility, particularly in discounting. How do the 90%, 79% compare to last year? You know, is GSI getting better, worse? Is P&C getting better worse? I assume P&C RE is probably relatively flat, but it is -- just interested in kind of how you see those dynamics playing out. And then the second question is just on the investment return, obviously, you've pointed to like an above 3% investment return for 2025. You're reinvesting at about 4.5% over the course of the year. I'm just interested in how quickly you think that GAAP should actually close. You know, it's a bit closer about how, how long will it take for us to get to that? 4.5% [fetch] number? Thank you. Christoph Jurecka - Muenchener Rueckversicherungs Gesellschaft in Muenchen AG - Chief Financial Officer, Member of the Management Board Yeah, good morning, Kamran. Thank you. I'll start with the first question, GSI and P&C Re. P&C Re I think I mentioned rates, the environment is still very attractive but plateauing on a level. So we wouldn't expect any significant improvement in operational profitability. As always, there is a large loss element in that number. And if you would look into P&C R and obviously the relative share of large losses in that comment ratio is higher than in today's combined segment depending on how 1/1 goes and how the final portfolio mix will look like we would expect 16% to 17% major loss loading in the combined ratio of P&C reinsurance new segment and only while reserve releases are expected to be 6% in that segment. So you see the composition of that combined ratio slightly changed due to the fact that it's a reinsurance only segment now, but the underlying profitability is very much unchanged. On the GSI side, the 90% I mentioned already is a particularly cautious starting point. You know, going into new segmentation, you have many technical topics to deal with. We shuffle a bit your data flows, your systems behind. Who knows if there are any surprises? Let's see. But we thought it would make sense to be a bit cautious, maybe with that target, maybe even a bit more than what we traditionally would have been Operationally, this segment is also in very good shape. The burden this year has been very much on the large loss side. I think we covered Hurricane Helene. That was a big event for GSI, which we wouldn't expect to repeat itself like that next year again. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Kamran Hossain - JPMorgan Chase & Co - Analyst : Fantastic. Thank you very much.

Question: Andrew Baker - The Goldman Sachs Group Inc - Analyst : Great. Thank you for taking my questions. The first is just the GSI book. I think you've previously given a insurance revenue target of EUR10 billion. Is that still the sort of number you're looking towards? And then secondly, on the life and health re book, we've seen a couple of peers now take some negative, fairly sizable negative assumption changes in sort of back end of '24. Are you expecting anything on this front? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Andrew Baker - The Goldman Sachs Group Inc - Analyst : Great. Thank you.

Question: Ivan Bokhmat - Barclays plc - Analyst : Good morning. Thank you very much for taking my questions. I've got two. The first one just on GSI. Christoph, you've mentioned that you don't expect a repeat of the high large losses in 2025. Could you, could you perhaps elaborate on that? Does that mean that as a standalone business, you've changed the underwriting or perhaps there's going to be some external reinsurance being purchased? Maybe, some, some color on that would be useful. And secondly, just thinking about the life and health, maybe to follow up on the previous question. Clearly in 2024 the run rate so far suggests a very strong beats over the initial guidance. And I think you've alluded several times during the year. I'm just wondering, how would you characterize the conservatism of that new target for 2025? Is that comparable, better, slightly less? Christoph Jurecka - Muenchener Rueckversicherungs Gesellschaft in Muenchen AG - Chief Financial Officer, Member of the Management Board Yeah. So the first question with the large losses on GSI, maybe a very general remark, it may be so obvious that I would not have to have to make it, but still. If you look at our various businesses from ERGO personalized business to reinsurance with, the big cut covers we are offering there and GSI being in between, I think one thing you really have to realize the lowest cat loading or CAT loading -- CAT losses expectation is clearly in ERGO with the highest in reinsurance. And GSI have to be expected to be somewhere in between. So not as independent as ERGO, not as stable as ERGO when it comes to large losses, but also of course, not as volatile as reinsurance P&C. Now what happened this year is that Helene, we had an event, and I think we talked about it a bit in Q3 already. We had an event which particularly affected the GSI business due to the nature of this particular hurricane which went into Georgia, into the Carolinas, High North and on a path which is rather unusual for hurricanes making landfall in Florida. And along that path, we had a significant exposure in GSI much more by the way than what you would have expected in Florida, for example. And this is a rather unusual -- has been a rather unusual event. I would not expect that to repeat itself next year. Again, already and this is the reason why my conclusion was next year. I would expect the cut to be lower than this year on the GSI side. Naturally, there is volatility so I could be proven wrong. But this is clearly my expectation that next year the cup volatility will be smaller in GSI than what we have seen this year. Life and health, and I think your question was the level of conservatism. Now, maybe I answer that question more generally, even when it comes to our outlook or our internal planning process, which is really the backdrop for the outlook we are giving today. And I think there, I can confirm it's very much unchanged. So it's an internal process. We do a planning, we go through all the boards, we take decisions and then we publish the results. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Will Hardcastle - UBS Group AG - Analyst : Good morning everyone. The first one is, what's the assumed investment gains and losses for 2025 in this guidance? Is there any and is it possible to say what that was in the '24 numbers as well in absolute numbers, just to get that moving part? And then thanks for giving us the P&C RE NatCat load of 16 to 17 points. I was just trying to understand is that the Cat load including large losses as well? Is it possible to get those for both P&C RE and GSI? I mean, we can work that out, but that would be helpful with that. And do the combined aggregates of the two move year-on-year because GSI is growing more or is the mix shift not big enough for that? Thank you. Christoph Jurecka - Muenchener Rueckversicherungs Gesellschaft in Muenchen AG - Chief Financial Officer, Member of the Management Board Yeah, Will, good morning. Well, on the investment result, I'd rather not break it down any further. It's so market dependent. And as I mentioned before, there's always this element in there that we deliberately sometimes decide to realize some losses or not or even in the past. But a few years ago, maybe more than a few years ago, also decided to realize some gains. So therefore, I can't give you any breakdown. But again, I think methodology generally is pretty much unchanged. So we do not include in our financial planning, any top-down measures. And when portfolio managers do some trading, obviously, it can result in realizing some losses or some gains and these effects we include in our planning. So we innovate in operational planning without any, any management overlay from any additional steering. So which means it's pretty comparable to what we had prior year. GSI, so let's start with the reinsurance loading 16% to 17%. Obviously, that's subject to what's going on in the 1/1 renewal. And as always, we will do the assessment based on our book as it will happen to be after the 1/1 renewal and therefore 16% to 17% is rather a range than a more precise number today. What you have to keep in mind that the 16% to 17% is just a mechanical or mathematical translation of our old 14% guidance. And the 14% related to the combination of GSI and reinsurance P&C. And if you then take out GSI just mathematically, obviously, for reinsurance P&C, the number has to be higher because for GSI, it's intrinsically lower. And mathematically, if you take the 14% and you look at the volumes GSI versus P&C reinsurance, you mathematically end at 16% to 70%. And then again, subject to what's happening in the 1/1 renewal. The same in the reserve releases, you had 5% for the combined segment. Mathematically, REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Michael Huttner - Joh. Berenberg, Gossler & Co KG - Analyst : Good morning. It's his colleague Michael Huttner. And I have two questions. The first one is after dinner Joachim Wenning be very kindly explained the rough profit mix of Munichre. So ERGO, I think he was looking forward maybe '26 or something, but ERGO was a EUR1 billion now that you've given EUR900 million and then he did split and then you've given life and health at EUR1.7 billion. And then there was also a split given for the between GSI and reinsurance. And from memory, but my memory is always so faulty, GSI was about EUR1.5 billion, which would then imply that -- trying to do the maths here very quickly, that reinsurance P&C RE would be EUR1.7 billion, which feels very low and conservative, but these are all guesses. You know, the feeling I have is that P&C RE is really 40% of the Group. So I would be more expecting a figure in the range of EUR2.5 billion. So I just wondered if you can -- I know you're not Joachim Wenning, but you obviously sit on the same Board. So maybe you can discuss how you see the general profit mix, not just '25 going forward, this huge diversification benefits which it gives you. And the other question on the volume growth, can you -- just looking at P&C RE, can you give a feel for what figure it is? Implicit, I think from your peers, we're seeing figures of 3% to 5% which to me sounds very low given the demand for cover. That would be interesting. Thank you. Christoph Jurecka - Muenchener Rueckversicherungs Gesellschaft in Muenchen AG - Chief Financial Officer, Member of the Management Board Yeah. Well, thank you for the questions. Good morning. I think your first question is referring to our diversification and the split of the various earning sources. And maybe we talk about it in more detail once we are able to really show you the GSI numbers. But maybe one remark ahead of that, it always depends a little bit on which earnings number you're looking at. If you look at the GSI business, we talked about the combined ratio target today, I think we talked about volume today already. So deducting a technical result from that seems to be a bit straightforward, more straightforward than talking about net income already today. And this is also what we are working through when we look into our segmentation today. The one fact I would like to mention though is that if we look at our investment strategy, you can already see today in the various segments we are having that the amount of risk we are taking is different or differing between the various segments. So if you look for example, into the investment yield we have in ERGO International, you will see that it's smaller than in, for example, ERGO P&C Germany or in the reinsurance P&C segment. And likewise, also in the GSI segment, we are generally taking less investment risk for operational reasons. And when you take less risk in investment, you also have less investment return usually. Or in other words, technical result is one thing, and bottom line is another thing which also depends REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Michael Huttner - Joh. Berenberg, Gossler & Co KG - Analyst : Can I just ask that? What was the revenue figure for GSI on the (inaudible) service? Christoph Jurecka - Muenchener Rueckversicherungs Gesellschaft in Muenchen AG - Chief Financial Officer, Member of the Management Board Well, I think we talked about the target already. The details of the P&L including revenue is something we are not in a position to be able to disclose today. We will do that together with Q1.

Question: Vinit Malhotra - Mediobanca Group - Analyst : Good morning, sir. Thank you. Two questions. My two questions will be on combined ratio, please. One on ERGO Germany and one P&C RE. And just the probably the easier to ask the ERGO Germany 89% combined ratio. I'm just curious what's driving sort of the worsening? I know that currently we are at 89% for '24 but we were at 87% for a while. So I'm just wondering if the 87% to 89% has something that you could point out maybe motor insurance or something that. On the P&C RE. So when I say P&C RE now, I mean the entire old segment, the -- if I -- I mean, one way to look at it is that you had 80.4% normalized at nine months and then obviously you commented that you're going to add prudence in 4Q. So I'm just curious that if you did not add prudence REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Faizan Lakhani - HSBC - Analyst : Hi there. Thank you for taking my questions. The first one is I'm just trying to bridge the gap from EUR5 billion to EUR6 billion. I know you've given a lot of the moving parts but if you could maybe break it down to sort of absolute numbers in terms of what's coming from investment ERGO and the two reinsurance, large segments as well, that would be helpful. I know you can't give the full details but rounded up that would be helpful. Secondly, within ERGO as well, your net result has been lifted by EUR100 million. Yet your combined ratio for Germany has deteriorated. Again, how are we getting that EUR100 million uplift? Thank you. Christoph Jurecka - Muenchener Rueckversicherungs Gesellschaft in Muenchen AG - Chief Financial Officer, Member of the Management Board I'll start with the second question. It's obviously not coming from the combined issues because one is stable and the other increase. So it is very much driven by the ERGO Life and Health segment and also partly by the investment return. Speaking about investment return, the bridge from EUR5 billion to EUR6 billion, the investment return is a significant driver in that upside. On top of that, you have the EUR100 million improvement. In ERGO it's EUR0.1 billion. From ERGO, you have the Life RE improvement. You have a stable technical result in the entire combined P&C RE and GSI segment based on some growth, which would also help grow the earnings there and the remainder so that the missing piece is an increase in the investment result and [finally] And so ERGO, Life RE, P&C RE all better. And what you're missing then is investment. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Faizan Lakhani - HSBC - Analyst : So just to clarify, are you saying the P&C RE underwriting result is relatively stable and growth isn't really coming from there in terms of the net result guidance. Christoph Jurecka - Muenchener Rueckversicherungs Gesellschaft in Muenchen AG - Chief Financial Officer, Member of the Management Board No, I'm saying the relative profitability as we are talking about the plateau level generally in those markets is stable and that's also what you see in the combined ratio outlook where we as mentioned go from 82% to 83%. But the 83% the difference based on a change in discount where you have a compensating effect in the ePHI. So therefore, that's largely stable but the volume is growing, and this then will lead -- as a result to even some higher income or higher result also in the P&C RE segment. And then you have life/health, and you have ERGO, and all the segments are benefiting from higher investment income.

Question: Faizan Lakhani - HSBC - Analyst : Perfect. Thank you.

Question: James Shuck - Citigroup Inc - Analyst : Yeah, hi there. It's James Shuck from the Citi. Firstly, I guess kind of an observation really, it'd be good if you could sort out your tit for tat with '23 and get your reporting dates on separate days. That just would be helpful, it shouldn't be too difficult. But looking beyond that, one of my main questions just been asked by (inaudible) actually, I was interested in the guidance of over 5 to over 6, but I think you've answered that as best you can. So that just leaves me to one question. And that's on the P&C RE kind of core combined ratio, so the 79%. On the face of it, that's a really strong number and I'm just kind of keen to understand, is there anything structural in that number when we're trying to compare it with this? Obviously, it looks better at the headline level and just kind of think you flag in terms of, I don't know, structured or [faculty REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: James Shuck - Citigroup Inc - Analyst : Okay, perfect. Thank you very much.

Question: Iain Pearce - BNP Paribas Exane - Analyst : Good morning. Thanks everybody. I just had a quick question the discounting guidance. Obviously, you're guiding to a reduction in the discounting benefit. And historically, you've spoken about sort of the conservatism embedded in your discounting calculation. Sort of looking at where rates are as we stand today. European rates ahead of where they were last January, Japanese rates ahead of where they were in April last year and US rates not far off where they were in sort of June and July. Just wondering what -- why you're expecting the discount rate benefit to fall by a percentage point? Is that all mix or are you assuming a sort of reduction in rates across the course of the year? Just trying to understand that guidance. If any sort of comments there would be helpful. Thank you. Christoph Jurecka - Muenchener Rueckversicherungs Gesellschaft in Muenchen AG - Chief Financial Officer, Member of the Management Board I think the -- Iain, good morning. The answer is quite straightforward. If you do a planning at some point, you have to take an assumption. And since then, interest rates of course, continue to move up and down and maybe in the US more up than down, but they can go in any direction anyway next year as well. So therefore, we just took the assumption that the discount is a bit smaller and, yeah, in theory, at least if interest rates REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Iain Pearce - BNP Paribas Exane - Analyst : Okay, perfect. Thank you.

Question: Derald Goh - RBC Capital Markets - Analyst : Hey, good morning, Christoph. The first question is a broad one. I'm just trying to get a sense of how that EUR6 billion target is set considering the growth on the actual '24 number. Thinking about, how does ROE come into play? And you know how there's also the ePHI earnings is presumably you want to be growing earnings as well into all three years as well. So that one is quite broad. The second question is will you be giving an ROE for P&C RE and GSI? And maybe can you give us a sense of what are the relative ROEs between those two segments? I'm asking because obviously they're growing a lot more on GSI, which suggests to me, the return on equity is higher than GSI, but I'm not sure that's the case. Thank you. Christoph Jurecka - Muenchener Rueckversicherungs Gesellschaft in Muenchen AG - Chief Financial Officer, Member of the Management Board Yeah, thank you for those questions. So the ROE target is unchanged, but we are outperforming it regularly right now. We will have an Investor Day next year to talk about our next strategy phase, which last -- the current one lasts until 2025 -- until the end of 2025. So obviously, the question is what will come thereafter and what will be new targets. But this is something we will be communicating on the end of next year. And I think the Investor Day date is set already. So therefore, my apologies, I will not be able to talk about long term ROE targets today. Short term, the target is the same, but obviously, we have been outperforming it for a while now. So I would expect it to be outperformed again next year based on these IFRS targets as we have been communicating to them today. Your question was how do we come up now with a EUR6 billion target if it's clearly above the ROE. So ROE obviously was not the guiding element here. But what we did basically is we did operational planning very much bottom up and looked into our various business lines across the globe, across all segments and added their operating performance potential for next year, added that up and came up with that number. And so it shows if you want the operational improvement that the shift from the EUR5 billion to the EUR6 billion target really shows the operational improvement we have been seeing in the course of the year and are projecting it now into next year. This is -- it's really what's driving the EUR6 billion. The split of the ROE between P&C RE and GSI, it's nothing we are able to talk about today and also will not be able to talk about it with our Q1 release. When we give you the detailed P&Ls on GSI, as well as on P&C RE because we defined a five-year plan with a target of 12% to 14% and then updated it to 14% to 16% for the overarching combined segment. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Derald Goh - RBC Capital Markets - Analyst : Yeah. Thank you. And just quickly clarifying this, the EUR6 billion target I think you might have mentioned earlier as well, it's not more or less prudent than before. Does that mean that you'll be -- you are including any reserve buffer building within that number or not? Christoph Jurecka - Muenchener Rueckversicherungs Gesellschaft in Muenchen AG - Chief Financial Officer, Member of the Management Board No. The way we do the planning is always very much the same in line with what we did in prior years and no management overlay included.

Question: Michael Huttner - Joh. Berenberg, Gossler & Co KG - Analyst : Fantastic. It was really -- [very light] it's Michael Huttner, again. Sorry about that. Can you remind me the NatCat, the 16% to 17%, just give me the comparative for outlook or the guide -- or expectation for 2024. Would that be possible? Christoph Jurecka - Muenchener Rueckversicherungs Gesellschaft in Muenchen AG - Chief Financial Officer, Member of the Management Board Again, the 16% to 17% is a mechanical reflection of the 14% we have for the overarching segment today. So if you want just a volume kind of reflection or a proportional reflection or -- so therefore -- so there's no new information in that number, if I put it that way, potentially. And therefore, the 14% guidance was the 14% guidance for the entire book for this year and is unchanged for the plan for next year for the GSI plus P&C Reinsurance combined segment. And the 16% to 17% range is the correct guidance for this year as well as for next year with maybe minor differences because GSI is growing more. So the volume mix is shifting a bit. But if 16% to 17% is the range anyway, so I would say more or less the same number for both years. And again, the intelligence in a way looking into our portfolio after 1/1 renewal and then potentially update the number and precisely say if it's 16% or 17% and whereabout, between the two, maybe this is something we'll be able to guide on only next year anyway, as we always do. So, just to remind you, the process is always after 1/1. We do a bottom-up analysis of our book and based on all our cut models, statistical methodologies we apply and we then come up with what the actual number is for the book after 1/1 and what the real then final large loss expectation for the year is going to be. And this process is unchanged. And so therefore, I think at the latest with Q1, they'll be able to talk about what the precise number then really is. So the 16% to 17% range is really very much the same for both years. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Michael Huttner - Joh. Berenberg, Gossler & Co KG - Analyst : Lovely. That's very clear, thank you.