Munich Re: ~€500m Helene loss dents Q3, to beat full-year profit target despite Milton

Global reinsurance giant Munich Re has pre-announced an expectation of around €500 million in losses from September’s hurricane Helene, but while the reinsurer expects significant additional claims expenditure from hurricane Milton in Q4, the company is still forecasting it will beat its full-year profit target.

Munich Re said that operational performance remained pleasing in Q3 2024 across all of its lines of business, with a preliminary net result of approximately €900 million reported for the period.

That’s some way below the average consensus estimate across 10 analyst firms, of €1.419 billion for the period.

But, Munich Re said the delta is due to “higher-than-average major-loss expenditure from natural catastrophes in property-casualty reinsurance.”

The largest impact for Q3 was the hurricane Helene loss, which Munich Re said would cost it about €500 million.

That was Munich Re’s largest single claims event in Q3 2024, but the company also said that, “Three loss events in
Canada together resulted in similar claims expenditure.”

On top of this, reflecting the costly period of weather and catastrophe events that Q3 has been, Munich Re highlighted these losses were, “In addition to numerous other natural catastrophes and man-made losses, significant damage occurred in Central and Eastern Europe due to Storm Boris and consequent flooding, as well as in the United States and the Caribbean owing to Hurricane Beryl.”

Looking ahead, Munich Re acknowledged that hurricane Milton will drive another significant loss for the company, as “claims expenditure attributable to Hurricane Milton will likely be significant.”

But, despite the heavy toll in Q3 and the additional burden of losses due to hurricane Milton, Munich Re said that it anticipates, “buoyed by the very good net result of €4.7bn after the first nine months of 2024 – to surpass its full-year profit target of €5bn.”

Which serves to drive home how profitable reinsurance can be for the large globally diversified players like Munich Re, giving them the ability to beat profit targets even in a year of elevated natural catastrophes.

Of course, the reset in reinsurance attachments, terms and conditions, as well as pricing, has been a key driver and protect reinsurers ability to deliver shareholder returns, even under relatively significant pressure from severe weather and natural catastrophes.

We’ve been discussing the ability of the catastrophe bond market to absorb losses from these hurricanes within just a few weeks of returns. But it seems even a major reinsurer like Munich Re could likely absorb both of these major hurricane loss events within a single quarter of profits, as well as all the other activity that has occurred as well.

Which further drives home how the reinsurance reset has improved the economics of the business for reinsurers, but also underlines the fact we aren’t seeing any capital erosion from the recent hurricane activity, which means the sector will have ample capital as it goes into the end of year renewals.