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Ukraine war 'to cost Munich Re €500m'

Analysts at Jefferies expect majority of conflict losses to be booked in the second quarter of the year

The war in Ukraine could cost Munich Re around €500m ($544m), according to analysts at Jefferies.

Jefferies said although these claims have already been incurred, it understands Munich Re's accounting means the only claims that can be booked are those that have been reported, or where there is sufficient information to confirm a loss.

As such, it also expects that only €100m ($108.9m) of the total will be booked in the first quarter of 2022, with the remaining losses reported in the second quarter.

By way of comparison, Jefferies expects Hannover Re to book €200m in the first quarter from the war.

Last week S&P Global Ratings said the Russia-Ukraine war could result in insured losses of $16bn to $35bn, with specialty lines being the most exposed and aviation the hardest hit.

S&P said the top 21 global reinsurers will likely assume around 50% of the specialty lines losses, which "are likely to be an earnings event for most reinsurers but could become a capital event for a few outliers".


Jefferies added that its model on Munich Re had seen some adjustments from the allocation of pandemic claims in Munich Re’s life and health reinsurance segment.

While Jefferies has left the total cost unchanged at €300m it now assumes these will be more front-end loaded, rather than evenly spread as previously thought.

As a result, Jefferies now assumes that 40% will be booked in the first quarter of 2022, 30% in the second quarter, 20% in the third quarter and 10% in the fourth quarter, echoing the earnings pattern that it presumes for Hannover Re's pandemic claims.

Jefferies also predicted that this year’s European storms are expected to cost Munich Re's Ergo subsidiary €40m.

“As these losses were likely still being reported at the end of the quarter, we factor in €30m (75%) of these in the first quarter and the remaining €10m (25%) in the second quarter," the analysts said. 

The analysts now expect the Ergo P&C Germany unit to miss its annual combined ratio guidance of 91.0%, reporting 92.6% instead. "Underlying though, we expect the business to remain on track in meeting the medium-term targets," they added. 

On reinsurance pricing, Jefferies expects Munich Re to report "mid-single-digit price rises" at the April 1 renewal, although rising economic inflation means that the risk adjusted price rise "is probably nearer to low single digit". 






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