Munich Re expecting €300M of COVID claims in 2022 after 2021 surprises

Munich Re has factored €300 million of COVID-19 life and health reinsurance claims into its 2022 profit estimate after suffering higher-than-expected claims in 2021.

"What you can see here clearly is that the pandemic is not over at all," Munich Re CFO Christoph Jurecka told journalists on a call for the reinsurer's 2021 earnings.

He added that the €300 million was based on current evidence and not a worst-case scenario. If, for example, there was a new wave of the virus in fall 2022, "that [would] clearly increase our guidance on COVID losses," Jurecka said.

In the non-life insurance and reinsurance segments, however, "we do not expect any significant COVID losses any more," the CFO said.

COVID-19-related life and health claims and reserves came in at €785 million for full year 2021 — the bulk of the roughly €1 billion of pandemic-related claims and reserves booked in the year — after adding €315 million in the fourth quarter. The claims were dominated by the U.S., India and South Africa, Munich Re said in its earnings presentation.

The full-year life and health claims came in higher than the €600 million Munich Re estimated when it published its third-quarter 2021 results. The reinsurer had already increased the figure to €400 million from €200 million in the first half before raising it again in the third quarter.

Jurecka said Munich Re had to increase its guidance repeatedly during the year because "the virus continuously kept surprising us" with new variants. The initial estimate was booked, he said, before the company was aware of the delta variant, and the €600 million expectation came before the onset of the omicron variant.

The fourth-quarter COVID-19 claims bill included a "rather conservative" reserve for incurred but not reported claims because of uncertainty about how much omicron was already reflected in claims reporting.

Despite higher-than-expected pandemic claims, persistently low interest rates and a major loss claims bill of €4.30 billion, Munich Re beat its own and analysts' expectations with a €2.93 billion profit for full year 2021. The company had predicted €2.8 billion, and analysts' consensus was €2.89 billion, according to figures provided by Munich Re.

Munich Re expects a profit of €3.3 billion for 2022. Jurecka said the reinsurer's confidence was driven by the continuation of good market conditions. "We think the positive and hardening market environment will continue at least until the end of this year," he said.

The company achieved a rate increase of 0.7% at the Jan. 1, 2022, renewals after adjustments for risk, business mix and claims inflation. Jurecka said the figure was "a real margin improvement."