MUNICH (dpa-AFX) - The world's largest reinsurer Munich Re exceeded its profit target last year despite high catastrophe losses. Thanks to higher interest rates and other special effects, the bottom line was a profit of a good 3.4 billion euros - 17 percent more than a year earlier and 100 million more than targeted. For 2023, CEO Joachim Wenning is still targeting a net profit of four billion euros, as the DAX-listed group announced in Munich on Thursday. Higher prices in the reinsurance business are expected to more than offset inflation-related increases in claims.

On the stock market, however, the news was met with a slide in share prices. Munich Re shares lost more than five percent in the morning to 307.50 euros, making them the biggest loser in the leading Dax index. The news of a higher dividend and a share buyback had already virtually evaporated on the market the day before, after the Group had only met the average expectations of analysts. Now Munich Re shares were trading a good one percent higher than at the turn of the year.

Industry expert Kamran Hossain of U.S. bank JPMorgan spoke of a good result in what was "undoubtedly a difficult year" for the industry. He said the share price weakness in the morning was no surprise, as the stock had a strong run in 2022. The share price had gained about 17 percent in 2022, while the overall market had been down.

"Munich Re has coped well with the crises of 2022 and continues to grow profitably," Wenning said. However, the Russian war of aggression in Ukraine, the slide on the stock markets and the significant rise in interest rates left deep scars on the Group's investments: the investment result slumped by almost a third year-on-year to 4.9 billion euros.

The fact that Munich Re's profit for the year nevertheless rose was also due to its primary insurance subsidiary Ergo. At 826 million euros, the Düsseldorf-based company earned around 37 percent more than in the previous year. This was due to favorable exchange rates and a special effect from higher interest rates. In German life and health insurance, Ergo thus earned almost three times as much as in 2021 and overall exceeded its profit target, which had been raised in the fall.

In reinsurance, Munich Re ultimately fared somewhat better than expected. In the fall, the Board of Management had lowered the profit target for the division to 2.5 billion euros due to the high catastrophe losses - in the end, it was almost 2.6 billion euros.

At just under 4.2 billion euros, the division had to shoulder only slightly lower catastrophe losses than in the previous year, when Hurricane Ida in the USA and the flood disaster in Germany had caused high losses. Although the destruction caused by Hurricane Ian in the USA cost Munich Re around €1.6 billion this time, the consequences of natural catastrophes were not as expensive overall as in the previous year. By contrast, major man-made losses cost the reinsurer around 600 million euros more, at a good 1.7 billion euros. According to the figures, the Russian war of aggression in Ukraine also contributed to this.

In view of the high inflation in many countries, Munich Re, like its competitors, raised prices. In the treaty renewals in property and casualty reinsurance at the turn of the year, it pushed through 2.3 percent higher prices on a risk-adjusted basis, according to the data. The January 1 negotiating round is the most important of the year, with Munich Re renewing around two-thirds of its treaties with primary insurers such as Allianz and Axa.

"Prices developed positively overall and were able to more than compensate for the in some cases significantly higher loss estimates, due mainly to inflation or other loss trends," it said. This is because the price increase mentioned has already factored out the increased loss expectations. Not all business partners went along with the price increases: Munich Re, for example, expanded its business volume by only 1.3 percent to 15.3 billion euros, less than the increase in premiums in the respective treaties.

For 2022, shareholders are to receive an increased dividend from 11 euros to 11.60 euros, as the Group had already announced on Wednesday. The Group also plans to buy back treasury shares worth a maximum of one billion euros by the time of the Annual General Meeting in 2024.

With its profit increase in the past year, Munich Re exceeded the average expectations of analysts. The Group had already published its target of four billion euros for 2023 in December. This figure is not directly comparable with the 3.4 billion from the previous year, as Munich Re, like other major insurers, will calculate its figures from 2023 onwards in accordance with the new accounting standard IFRS 17. Chief Financial Officer Christoph Jurecka had said in December that this change would indeed drive the surplus up somewhat. However, he said that the greater part of the targeted profit increase would be achieved through improvements in the operating business./stw/men/jha/