The European reinsurance giant said it has started to receive its first claims arising from the Ukraine war, which started in February, as it warned of a "challenging environment" for the business.
Analysts predict that Munich Re will be among the reinsurers worst affected by the violence, with total claims likely to reach €500 million. PCS Global Specialty, a division of U.S. risk management company Verisk, warned in April that global insurance losses from the Ukraine war could balloon to $20 billion.
"Munich Re is helping to provide humanitarian aid for the people of Ukraine and fully supports the sanctions against Russia," Christoph Jurecka, chief executive of the German multinational, said. "The financial consequences of the war and the sanctions severely impacted our result in the first quarter: we made write-downs for impairment losses on Russian and Ukrainian bonds alike and recorded the first claims."
Financial analysts Jefferies said in April that Munich Re would probably take a €500 million hit from the war. But only €100 million of that would be able to be reported in the first three months of the year, the analyst added. The rest would be reported in the company's second quarter results.
"Although these claims have already been incurred, we understand that Munich Re's accounting means that the only claims that can be booked are those that have been reported or where there is sufficient information to confirm a loss," Jefferies said in a research note at the start of April.
Munich Re said that it managed to turn a profit in the first quarter of €608 million, despite the €100 million hit in expenditure for the Ukraine war and natural catastrophe claims of €481 million.
The group made its profits mostly from its reinsurance business division. Munich Re said that its life and health insurance arm suffered a loss in the first quarter because of claims of €150 million connected to the COVID-19 crisis, "above all from the Omicron wave" in the U.S.
--Editing by Ed Harris.
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