Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München

Welcome, very warm welcome to our Q1 earnings call, including the April renewals. Today, our speaker is Christoph Jureka, our CFO. And as usual, Christoph will kick off the call with his introduction. And then we will go right into Q&A, as always. So I have the pleasure now to hand it over to Christoph. The floor is yours.

Thank you, Christian, and a good morning also from my side. With a net income of almost 600 million euros in Q1, we had a solid start to the year. Good operational development in both our reinsurance segments mitigated the impact of above average major losses, including the claims related to COVID-19. And on top of that, Ergo had a particularly strong performance. And also the investment result was fully in line with our expectations. Our group return on equity amounted to 10.4% this quarter. Let's start with the investment result. The conditions in the capital markets, as you know, were favorable in Q1. Friendly equity markets, rising bond yields, so a really favorable environment, particularly also, of course, in North America. The latter benefited our investment yield, which increased to 1.5% this quarter. The last two quarters we were at 1.3%, so this is helping our sustainable investment income, obviously. Our running yield then amounted to 2.3% this time, and investment return overall was 2.7% and was supported by disposal gains due to the typical portfolio turnover and also due to ZZR financing, which then altogether more than compensated for losses we had on equity and fixed income derivatives we use for hedging. Now let's turn to reinsurance. The life and health technical result, including fee income, amounted to 51 million euros and fell short of the prorata annual ambition. as expected, I have to say. And this is due to the prevailing pandemic and the winter surge of COVID-19 claims in the United States. In accordance with our assumption that the largest share of claims should be accounted for in the first half of the year, and with a correspondingly high burden in Q1, our COVID-19 losses this quarter amounted to 167 million euros. which were driven by the United States, but also to a smaller extent by higher than expected claims in South Africa. As a consequence, we have some uncertainty now as to our loss estimate of the 200 million for 2021, which we might slightly exceed, but the best guess is only by maybe some tens of millions, if at all. Apart from COVID-19, the aggregate experience was very favorable in life health, specifically in the United States and also in Europe. And in Australia, we were benefiting from rising interest rates, which had a positive impact on claims reserves. And on top of that, fee income once again was very strong. Altogether, we therefore consider Q1 to be a very promising start to the year for this segment, And of course, we are sticking to our annual guidance of a technical result around 400 million, including fee income. In P&C reinsurance, we posted above average major losses, primarily owing to the winter storm URI in the United States. COVID-19 losses. of around 100 million were fully in line with expectations of 300 million for the full year. The major loss ratio overall amounted to 15.5 percentage points and lifted the combined ratio up to 98.9%. But if you normalize for the large losses and keep in mind that reserve releases are four percentage points or have been four percentage points, the normalized combined ratio amounted to 95.9%. which is fully in line with our guidance, considering that the number is to improve further in future quarters as we continue to earn through the rate increases achieved in recent renewals. Which brings me to the April renewals. which featured the same favorable trends we observed in previous renewals. And overall, the price level of our portfolio increased by 2.4%, a very pleasing outcome. And this number matched exactly the increase we also saw in the general renewals. At the same time, we were able to expand premium volume by around 17%. by exploiting opportunities we found especially in Japan and India, and as well with global clients. In primary insurance, Ergo continued its pleasing financial performance, posting a strong net result of €178 million. In all lines of business, the underlying performance was healthy. And this was accompanied with regard to COVID-19 by even a net positive effect this time due to lower claims, especially in travel insurance. A significant part of the error result was generated in the German life and health business and its net result of 94 million euros, which was driven by lower claims and the lower policy of the participation in health, as well as also lower claims in travel. In addition, as has been usual already the last couple of years, the realized disposal gains for ZZR funding in life were above the pro-rata run rate. This brings me to P&C Germany, where we posted a combined ratio of 94.2% in Q1, somewhat higher than anticipated. Here, the manmade losses were above expectations, and on top of that, I may remind you of seasonal fluctuations in claims and premiums, which are very typical for first quarter at Ergo, and which were only partially compensated for by frequency benefits related to COVID-19 in Motul. If we consider all these effects, the underlying combined ratio at Ergo Germany fully supports the full year guidance. In the international business, we also saw an ongoing favorable development and a combined ratio amounting to 93.8%, which underlines the successful strengthening of our presence in the core markets. Q1, for example, was particularly strong in Poland and in Greece. Here again, we have seasonal effects, especially in health, and if you take them into account, the underlying combined ratio is also here fully in line with the guidance. Now, some remarks on capital management. The group's economic position remains very sound. We increased the Solvency II ratio to 270% in Q1 and are very close now to the upper end of our optimal range, which is at 220. The main driver for that increase were rising risk-free interest rates. And the positive contribution we saw from the operating economic earnings this quarter was then invested immediately into business growth, so into increasing capital requirements related to that growth. Please note that the Q1 solvency ratio includes still 1 billion euros in hybrid debt that will be redeemed on 26th of May, as we have announced recently. Conversely, and that's also only as a reminder, the dividend for the full year 2020 has of course already been deducted much earlier, so at the beginning of the year already. I'd like to conclude with the outlook for 2021. We now expect premiums in reinsurance to be €2 billion higher in light of the strong business growth in P&Z reinsurance, which we saw in the first two renewals this year. All other figures in our outlook, especially the ones related to profitability, remain unchanged. Our Q1 result puts us on a pretty good path, in my view, towards achieving our net income guidance of €2.8 billion. And even we have considerable uncertainty still with respect to COVID-19. We assume that the pandemic obviously will improve over the course of 2021 as more and more people are vaccinated. As mentioned before, we cannot rule out today that the estimated COVID-19 effect on life and health and reinsurance will be exceeded. But on the other hand, COVID-19 related losses for the full year could be lower than originally anticipated at Ergo. So all in all, the guidance is pretty stable. With that, I'm at the end of my introduction and looking forward to answering your questions. But first, we'll hand it back to Christian. Thank you, Christoph.

So let's move on and let's start with the Q&A. As always, my housekeeping remark, please limit the number of your questions to a maximum of two per person. So we are ready to go. Who is first, please?