Muenchener Rueckversicherungs-Gesellschaft in Muenchen AG Q3 2025 Earnings Call Transcript

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

Question: Shanti Kang - Bofa Merrill Lynch Asset Holdings Inc - Analyst : So on the revenue guide, which is now EUR61 billion, you mentioned that was attributed to three components, that was the premium adjustments, the renewals and FX impacts. And I was just curious, could you help us gauge how much of that guide reduction today was linked to each component that you've mentioned? I was mainly surprised just to see that FX is a contributing factor in this second round revision. So that's my first question. And then the second one is just given the buoyancy of the 9M results today at EUR5.2 billion versus that EUR6 billion mark, what really held you back from raising guidance for the full year today? Should we take that as some cautious positioning into Q4, for example? Christoph Jurecka - Muenchener Rueckversicherungs-Gesellschaft in Muenchen AG - Chief Financial Officer, Member of the Management Board Shanti, thank you very much. Sorry for the slight delay. We are two here together today. So we always have to discuss who's taking which question. I kick it off here now. I'm Christoph speaking, still here. I'll start with the second question. So the 9-month result, indeed, of EUR5.2 billion is very close already to the EUR6 billion. So as I said also in my introductory remarks, we are very optimistic not only to achieve the EUR6 billion, but potentially also exceed it. But I think what I also mentioned is that we will opportunistically just use the opportunity to strengthen our balance sheet and also strengthen earnings for the future. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Andrew Baker - Goldman Sachs Group Inc - Analyst : First one, just in terms of the sort of prudent actions that you're talking about in Q4, how much of that is you're conscious that the full year '25 net income number would be the base for your next plan? Or should we -- when we think about your new targets in the base, should we expect that to be on the sort of normalized EUR6 billion sort of target number? And then secondly, just on the GSI insurance revenue growth. I think you said in your comments that the sort of underlying growth is mid-single digit. Can you just help me bridge sort of how I get to that number? Because again, if I just look at your slides and back out FX, it looks like it's a bit below there. So what am I missing in terms of that bridge

Question: Michael Huttner - Joh Berenberg Gossler & Co KG - Analyst : I've got one question, which my colleague and I debated, and he thought you wouldn't be able to answer, and I'm hoping you might. And then the second one is much simpler. So the first question, you kind of said it pretty much throughout your presentation, you're incredibly profitable. If I take the 62.7% or whatever combined ratio in Q1 in Reinsurance, add back the discounting, so we're at 71%. I think some of your peers would be around 90%. And I know you can't comment around your peers, but if your peers represent the markets, and you must be thinking about the market as well when you do your numbers, you're almost 20 points better, and this is almost a question to -- it's nice to have both the CFO and the CEO in almost the same role at the moment. How do you think about that? It's -- where do you see this excess -- what I would term as excess, all this better than market profitability coming from? It's very nice. The second question is really, really simple. Can you say anything about the credit losses in the US? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Kamran Hossain - JPMorgan Chase & Co - Analyst : Two questions from me. The first one is just coming back to the kind of EUR6 billion guidance. It sounds to me that you're more likely than not to take action in Q4. Just really intrigued, kind of your EUR1.5 billion for a normal quarter large -- you've got large loss budget within that. Is there anything going on large losses as well that we should consider? One of your peers commented particularly on Melissa yesterday. So could there be even greater than EUR700 million post-tax kind of buffering via realized losses and prudence in reserves? The second question is on GSI. Really great to see another excellent quarter in terms of like headline performance. I just wanted to get your insight into whether you think this is just nat cat good luck for 2 quarters. I think you were 78% in Q2, you are 82% and a bit for Q3 or whether there's anything else going on underlying that is coming in a little bit better than you had assumed? Andrew Buchanan - Muenchener Rueckversicherungs-Gesellschaft in Muenchen AG - Chief Financial Officer - Reinsurance So Kamran, it's Andrew speaking again. On the Q4 question, you asked if there's anything special out there and you mentioned Melissa, in particular. I have to add a pretty hefty caveat upfront. It's early days. The loss estimation process on Melissa is in full swing, as you would expect. It's a Caribbean event. I think probably the numbers will take a bit longer to stabilize. But at this stage, we are counting on a mid-triple-digit loss number. That's our current view. And I would say, just for the record, that fits comfortably inside our loss budget for Q4. So if that's the only thing we see, then we'll certainly have some room left over. But other than that, I don't think there's anything noteworthy that needs to be mentioned. Then the question on GSI. So thank you for mentioning that the numbers we're now seeing in Q2 and Q3 are certainly looking better. Overall, I would say to me, this is a fairer reflection of the underlying earnings power of the business. So I'm really pleased to see GSI at this level, it feels about right. I can tell you that we are not supporting that result or dressing that result up by doing any kind of extraordinary reserve releases behind the scenes or anything else. So that really is a true number. What you see LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Ivan Bokhmat - Barclays Services Corp - Analyst : I've got two, please. The first one is on the P&C. Just wondering, looking back to the 9 months of the year, I think perhaps to draw some parallels to Michael's questions. One of the things your large peers were doing was adding to reserve buffers. Is there any indication that in your combined ratio, there's any increased level of prudence or it's all reserved for the Q4 actuarial review? And then maybe my second question, shifting topics on Life and Health Re. There was a bit more negative experience this quarter. Perhaps you could give a little more color on the geographies and lines of business. One thing I'm particularly interested about is whether some of this experience may be related to the large transactions that you've been writing recently? And perhaps you can elaborate on how your experience with those large transactions have been unfolding. Christoph Jurecka - Muenchener Rueckversicherungs-Gesellschaft in Muenchen AG - Chief Financial Officer, Member of the Management Board Ivan, thank you for the question. I'll start with P&C and Andrew will then take your Life question. On the P&C side, so reserves, when -- I mean, our reserve review always goes into the fourth quarter, so it's still ongoing. But what we see so far is a very strong reserve performance across all our books more or less. So having said that, I think the way we book has been as conservative as ever, and we have a very positive reserve performance was on that basis. Did we deliberately decide already to have additional reserve strengthening so far until the first 9 months, so in the first 3 quarters? No, that was not the case. But in the first 9 months, we more or less booked as we always would book in our regular business activity. While in the fourth quarter, and this is what I said in my introductory remarks, opportunistically, we might even add additional prudence to that if the result allows, and just to be even more on the safe side going forward. Do we have any indication that, that would be needed? No, we don't. But then on the other hand, we really understand from many of our investors how much they appreciate a smooth earnings trajectory, smooth and slowly increasing earnings trajectory going forward. Obviously, in some very -- in very good times, you need to somehow also prepare -- to be prepared once there is potentially a quarter or maybe also a couple of quarters where volatility is striking. And therefore, as I said, opportunistically, we just might use the fourth quarter to build up even more prudence despite the positive developments we saw so far this year. Andrew Buchanan - Muenchener Rueckversicherungs-Gesellschaft in Muenchen AG - Chief Financial Officer - Reinsurance And Ivan, I'll take the Life Health question. It's Andrew again. So you asked about the experience and the geographical spread of that. So quite a few different markets. And I would say what we saw in Q3 was a number of relatively unspectacular items that each on their own were in the double-digit millions, which in this quarter happens to all have a negative sign attached to them, and so they tend to add up. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Christopher Hartwell - Autonomous - Analyst : Just two, if I may. I just wanted to come back to the revenue trend, I think, it's really the answer to the first question. I'm trying to sort of think about the message that -- or what we've seen in the Q3 versus the experience from the July renewals. I mean, I think back in the Q2 results, you were talking about a more sort of conservative view on the cat book. So I was wondering how much of this that we're seeing in Q3 is relating to -- specifically to cat. And therefore, are we seeing a bigger Q3 impact on growth than ordinarily we would see in future quarters just on that point. Hopefully, you get what I'm trying to get out on that question. And secondly, just on NEXT, the acquisition is a quarter in now. So I was wondering if you could maybe share your thoughts. I know it was a business you knew quite well, but now you've got 100% ownership of it. I was wondering if maybe you can update on your enthusiasm for the growth profile that you have there. Christoph Jurecka - Muenchener Rueckversicherungs-Gesellschaft in Muenchen AG - Chief Financial Officer, Member of the Management Board Sure. The first question, I think I outlined already that the underlying reasons for the revenue decline. The cat business is obviously also part of that. So what we said in the 1/7 renewal, somehow had a limited impact also in the numbers as we present them today. But you also have to think about that after the renewal, not so much time elapsed yet. So therefore, I mean, it's also other renewals which played a role there, but also business which is written outside of the renewals or premium adjustments, which are independent of the renewal dates, also played a role. So it's a bit of a mixed bag, I would say. It's not cat only or not even pronounced towards the cat direction. On NEXT, indeed, so the closing was in the 1st of July. So we have now a bit more than 1 quarter where NEXT now belongs to us as a group. The integration work is going as expected. So a lot of the internal operational stuff has been set up. We were also able, as you can see, to include NEXT already fully in our IFRS numbers for the Q3 on a preliminary basis. We are working hard to get the first real, and more precise consolidation done and also for the year-end closing, and then we are well on track to do that. Also, a lot of the other let's say, nonfinancial operating integration work is going well. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Vinit Malhotra - Mediobanca - Analyst : Yes. So my two questions. One is just on the -- again, sorry to bring it up. But when we look at the revenue progression, so not talking about the guidance as such, but the 9 months, and thanks for breaking it out at [EUR650 million], I mean it's still -- even excluding the EUR250 million you mentioned, it's still about 2.5%, maybe 3% organic weakness. And when I look at the renewals, I mean, a rough check is suggesting this year's YTD down about 1.5% and last year was about plus 1% or 2%. So maybe just rounding numbers, but I'm just trying to understand if there is something more than the renewals and now we are excluding NDIC, excluding premium adjustments. Is there something more that you would like to flag? And maybe the answer is a simple, no, but I just wanted to be very sure of that. Second thing is on the balance sheet strengthening in 4Q and you said it's opportunistic. But I'm just wondering, I mean, 2Q and 3Q were 60s combined nat cat reserve releases seen. So I mean, what's the -- I mean, what better opportunity would have been to actually add to reserves? And I mean, maybe the answer is the reserve review is needed for that decision. But I'm just curious about releasing reserves from nat cat for 2 quarters. And then in fourth quarter, we are adding back. So I'm just curious about that reserving action. Andrew Buchanan - Muenchener Rueckversicherungs-Gesellschaft in Muenchen AG - Chief Financial Officer - Reinsurance Vinit, it's Andrew here. Thanks so much for the question. I mean, let me take the follow-up on the revenue item first. Because you said, look, even if we strip out EUR250 million for NDIC, you're asking what else can be going on there? And it's a fair question. So not all the business we write is dictated by our big renewal dates in the treaty reinsurance on 1st of January, April and July. I think Christoph's comments earlier about how we've been really strict and disciplined about reducing business that doesn't meet our requirements. That's for sure, the most important part of the story. We do also have some other business that's perhaps a bit more flow in its nature, where we have to continually update the estimates as we go through the year as new information comes to light. So one example I could give you there, just to help you really concretely feel what we're talking about is I might have proportional treaty that I may have renewed all the way back on the 1st of January, but where neither we nor the client know exactly how many underlying policies are going to be sold. And so as you go through the year, the primary volumes get updated. And then those volumes get further updated when statements of account reach us. So of course, there's a constant refining of estimates that happens during the year. And many times, you probably have ups and downs in those estimates would even out to a large extent. I would say this time, those estimation updates tended more towards the negative, but we've tended to see more reductions in volume. Perhaps it's a bit anecdotal, but another example I would offer you so that you can feel what kinds of things are going on is agricultural business, agro business, where some of it, the insured amount, and therefore, the premium volume actually responds to agricultural prices. And so when commodity prices drop in a particular period, you actually have less risk and less premium. And that indeed is something else that has happened. But you wouldn't necessarily know that on the renewal date so you wouldn't pick that up in the renewal reporting. So when we talk about premium updates or updates of estimates, there are also these other factors blending in not only the sort of big decisions on the renewal date to renew or not renew a program. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: James Shuck - Citibank Cameroon SA (Douala Branch) - Analyst : I had a question to begin with about Munich Re Ventures. Just keen to understand why you decided to close that unit? Obviously, it's given birth to NEXT for you, which one would think would be a great success. And it just seems as if Christoph, that's like one of your first moves, moving into the new CEO role, has been to shut that unit. So just keen to see if there's any kind of messaging that we can read into that closure? And secondly, I believe that Jo Wenning has stated at one of the conferences that we can expect the kind of flattish outlook for insurance revenues in P&C Re, excluding GSI. Could you just clarify what is meant by that? Over what time frame? Is that nominal? Is that real? Is it in constant FX? Would be very helpful to get an idea of the outlook for P&C Re revenues based on previous commentary. Christoph Jurecka - Muenchener Rueckversicherungs-Gesellschaft in Muenchen AG - Chief Financial Officer, Member of the Management Board James, thank you. Excellent questions. I'll start with Munich Re Ventures. So first of all, there's no CEO messaging at all in any of the items you might observe at Munich Re today or in the last quarters or even in the weeks to come. We do have the CEO right now, and there will be a new one next year, and currently, I'm the CFO. And that's all about it. We'll speak more about the future anyway on the 11th of December. So I refrain from commenting any more on future CEO kind of questions. I don't think it's the right point in time to do that. On Munich Re Ventures, though, what I can say is that there has been a shift in our activities, not only related to Munich Re Ventures, but more broadly that we would wanted to concentrate more on our core activities, on our core insurance and reinsurance business. And in that course, we did take some action already also in other areas in recent years. And in line with that activity, we also decided that it would be a better way forward to have that activity now handled or to be managed by our asset manager, MEAG, instead of Munich Re LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Emanuele Musio - Intesa Sanpaolo IMI Securities Corp - Analyst : I can see there is quite a bit of focus on revenue growth and cycle management. While I also note that you have quite a sizable amount of surplus capital based on your solvency target range and this continues to grow. It is about EUR16 billion, if I'm not wrong. So I was wondering how much of that -- unencumbered and deployable to other uses other than organic growth? And if you can also remind us what is your rationale for further M&A? And if there is any ROI [or rate] that perhaps you may want to share with us. And lastly, on GSI what are the lines of business that you see most attractive at the moment? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Roland PfSnder - ODDO BHF - Analyst : One question from my side on ERGO Germany. It seems like there has been some revenue softness in the last 2 quarters. So maybe you could shed a little bit light in what's going on in P&C in the light of, yes, recent price increases in the market, while revenues are actually falling on an organic level. Christoph Jurecka - Muenchener Rueckversicherungs-Gesellschaft in Muenchen AG - Chief Financial Officer, Member of the Management Board I'll take the ERGO question, and I think there was one question on -- Emanuele still on GSI, which I think Andrew will then also cover. On the ERGO Germany side, nothing very specific. As always, in the various lines of business, sometimes you focus a bit more on profitability, and this is what we did. And therefore, the growth is a bit more muted currently in P&C Germany than what it used to be maybe a year or 2 ago, but nothing really spectacular to comment on. Andrew Buchanan - Muenchener Rueckversicherungs-Gesellschaft in Muenchen AG - Chief Financial Officer - Reinsurance And it's Andrew here. Let me go back to the question posed by Emanuele about GSI. And the first thing I would want to say there is just when we talk about GSI, it's important to remember that this is really a family of businesses that increasingly are working together, but which LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Michael Huttner - Joh Berenberg Gossler & Co KG - Analyst : Two questions. One, the US dollar rebalancing. I think you spoke about it probably Q1. I just wondered, can you give us an idea of how far you've gone in that direction? And then the second is ERGO growth in Scandinavia. My colleague, the famous colleague who was right on the first question, did ask me to ask about this, and I thought that's fair enough. Scandinavia has always been -- I always thought it was kind of almost a closed market, very difficult to break into, but it'd be interesting to hear what you have to say. Christoph Jurecka - Muenchener Rueckversicherungs-Gesellschaft in Muenchen AG - Chief Financial Officer, Member of the Management Board Sure, Michael. Thank you. So let's start with ERGO Scandinavia. ERGO always had a joint venture there, 50-50, and took over the other 50%, and now it's 100%. So in a way, it's not a new market entry, but just increasing the stake in an existing business. So therefore, easier to break into that market and the health business we have then Norway has always been running quite beautifully from a performance perspective, traditionally for many years. So we're happy to have it now in the group to 100%. So that's everything which is going on there. Remind me of the other question?

Question: Michael Huttner - Joh Berenberg Gossler & Co KG - Analyst : And just on this, can you explain why initially you were long US dollars? I think it has to do with capital allocation or something. But I struggle with this. Now you have so much capital, it's probably irrelevant. Christoph Jurecka - Muenchener Rueckversicherungs-Gesellschaft in Muenchen AG - Chief Financial Officer, Member of the Management Board No, no, Michael. For us, currency is like any other asset class where we would take positions in the technical asset allocation. And historically, currency, US dollar long was always a natural hedge for other risky asset losing value. So therefore, in a way, it was a hedge position to offset the risk we would take, for example, in equities or commodities or other asset classes. All, as you know, to a limited extent anyway. We are an insurer, so we are not taking huge positions, but we do take positions here and there. And indeed, the tactical asset allocation in recent times, achieved quite a beautiful outperformance for us with a nice amount of base points adding to our overall investment result. But as this year, the currency position has been suffering so much, this year, obviously, the TAA was burdened by that. But I think year-to-date, they were even able to overcompensate the currency loss on an economic basis, including all the TAA positions. Having said that now, the hedge position, obviously, it didn't work this year. So this year, the correlation between currency and the risky asset classes was different than historically, for the obvious reasons, political reasons. And therefore, it was much harder this year to benefit from that hedge position. But -- so this year, we didn't benefit. But in the past, we would have benefited from that hedge very often.

Question: Ivan Bokhmat - Barclays Services Corp - Analyst : Just two small follow-ups. When thinking about the P&C revenues, one of the drivers you mentioned in the slides, but not so much in the commentary now was the share reduction in the proportional business. I was just wondering if this is driven by your decision to write less of quota shares or just the competition, resulting in an increased allocation to those quota shares being smaller. So maybe you could comment on that, or maybe specific lines of business where that applies? And second question, I noticed that in ERGO Germany, the CSM was seeing some sizable negative operating changes during the quarter. Was that related to tax or any other reason? Christoph Jurecka - Muenchener Rueckversicherungs-Gesellschaft in Muenchen AG - Chief Financial Officer, Member of the Management Board I briefly take the ERGO Germany questions. Indeed, this is tax -- so the tax rate change due to the corporate tax rate did also affect the model for the CSM. I don't go into all the technicalities here, but indeed, that's the driver behind that reduction. There will be an offsetting effect or a compensating effect in due course when the actual tax rate is lower starting 2028. Andrew Buchanan - Muenchener Rueckversicherungs-Gesellschaft in Muenchen AG - Chief Financial Officer - Reinsurance And Ivan, on your question about the proportional business, yes, you asked, are these reductions the result of our own, let's say, explicit decision? Or is it a case of having our shares reduced? Well, the answer honestly is that it's a bit of both. And in some cases, it's almost a LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Ivan Bokhmat - Barclays Services Corp - Analyst : Maybe I could rephrase it a little bit. Do you see clients seeding less business in general? Or it's just the more commercial negotiations in this case? Andrew Buchanan - Muenchener Rueckversicherungs-Gesellschaft in Muenchen AG - Chief Financial Officer - Reinsurance I wouldn't say that there is a general trend for all clients to seed less business. I do think that in certain markets, after a few years of decent profitability, some balance sheets have been rebuilt and strengthened. And it is the case that sometimes in reinsurance, you're not only competing against the other reinsurance companies, but you're competing against the client's retention. So there are definitely some clients out there that are -- now perhaps have the financial capability to accept more risks on their balance sheet than before. That is true. But also, with the view ahead to the 1/1 earnings campaign, I mean, anecdotally, in our risk committees, I think we are also seeing one or two requests for additional capacity that might be needed by certain clients. So I think there could be some increases as well as decreases, which is why I wouldn't want to be too pessimistic at this point.

Question: Iain Pearce - Exane Bnp Paribas - Analyst : Just two very quick ones on ERGO. If we take the normalization and sort of the EUR50 million of one-off net benefits you've had, do you see that EUR250 million as a good run rate going forward for ERGO? And then second one, given you've not changed the net income guidance for ERGO and they already set at sort of EUR800 million for the 9 months, should we be viewing this as there's prudency to be added in ERGO as well as in the reinsurance businesses in Q4 or investment losses in ERGO in Q4 as well as in the reinsurance businesses? Christoph Jurecka - Muenchener Rueckversicherungs-Gesellschaft in Muenchen AG - Chief Financial Officer, Member of the Management Board So I think the very brief easy answer is ERGO is acting similar like we do as a group overall. So I think it's the same financial steering and DNA also in ERGO. So indeed, you could look at the run rate and interpret it as the target should be should be increased. But then also at the ERGO side, there are measures around how to maybe prepare a bit also for the future. And then ERGO will also be looking into those, obviously. So therefore, the guidance of EUR0.9 billion, I think is still the guidance despite the fact that we saw 3 quarters now where the run rate was rather around the EUR250 million, which, by the way, is very good news because it shows that underlying ERGO is doing very well. And I think this is really reassuring and then showing how much success and how much progress has been made again by ERGO. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.