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FAQ: transition to the new IFRS 9/17 reporting standards


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    How does Munich Re view the new IFRS 9/17 reporting standards with regard to its own business?

    Christoph Jurecka, CFO: “Taken together with IFRS 9, IFRS 17 represents a revolutionary accounting framework. It will comprehensively change how we disclose our financial data. Improved transparency and comparability will convey Munich Re’s financial strength and profitability on the capital markets even more clearly.”

    What is the schedule for introducing the new IFRS 9/17 standards?

    • Our 2022 Annual Report will be the last one that Munich Re releases on the basis of the former reporting standards (IAS 39/IFRS 4).
    • In mid-December 2022, Munich Re will present key figures and an outlook for 2023 based on IFRS 9/17, together with information on the transition. 
    • Q1 2023 will be the first time that Munich Re publishes the quarterly figures in keeping with the new standards (release date: 17 May 2023).

    What general effects does the introduction of IFRS 9/17 entail?

    First of all, the changes implied by IFRS 9/17 are limited to accounting – our economic steering will remain unchanged, as will our business strategy, dividend policy and share buy-back policy, our conservative reserving strategy and our capital strength.

    The new reporting standards – IFRS 9 for financial instruments and IFRS 17 for the accounting of insurance contracts – will fundamentally change how our business is measured, presented and disclosed. The transparency of our financial reports and comparability with our peers will both be enhanced. Furthermore, the earnings power of our diversified business model will become even more visible for the financial world and our shareholders alike.

    In addition, IFRS 9/17 addresses several shortcomings of past reporting standards:

    • Market-consistent valuation solves systematic mismatches between the assets side and liabilities side
    • Clarity ensured by appropriate reflection of revenues and separate recognition of insurance business from investment-type contracts
    • Transparency ensured by disclosing expected future profits from long-tail business (in the CSM)

    What measurement models does Munich Re use?

    Depending on the specifics of the respective segment, the following measurement models are used under IFRS 17:

    • General Measurement Model (GMM): for long-term business in L/H reinsurance and at ERGO
    • Premium Allocation Approach (PAA): for short-term P-C business – in our P-C reinsurance and at ERGO
    • Variable Fee Approach (VFA): for business with profit sharing, esp. at ERGO L/H Germany

    What will be the most important concrete effects of the transition to IFRS 9/17 at Munich Re?

    A)    Changes in the balance sheet (as at 31 December 2021):

    • Investments: Increase due to the disclosure of off-balance-sheet valuation reserves (IAS 39 without deposits retained: ~€230bn / IFRS 9: ~€240bn)
    • New balance sheet item Contractual Service Margin (CSM) quantifies profits not yet earned (after risk adjustment). The CSM (€22.3bn) reflects the value of our long-term life and health business. The loss component (€1.4bn) esp. reflects the conservative reserving approach in our P-C business.
    • Equity: will decline slightly during the transition due to the transfer of unrealised gains – formerly recognised in equity – to the CSM (IFRS 4: €30.9bn / IFRS 17: €28.4bn)
    • Increased return on equity (RoE) – due to the transition to IFRS 17
    • Debt leverage: continues to be one of the lowest in our sector – under IFRS 17, the CSM is included in the calculation basis (IFRS 4: 14.7% / IFRS 17: 10.7%)

    B)    Changes in the income statement resulting from the transition to IFRS 9/17:

    • In general: higher result due to the transition to IFRS 9/17, as our economic earnings power will be more accurately reflected.
    • New income statement item: insurance revenue (€58bn/outlook for 2023) will replace gross premiums written (€70bn). (difference esp. due to the exclusion of fixed commissions and non-distinct investment components (NDICs), e.g. profit components)
    • Combined ratio will be 1 to 2% lower in every field of business due to the different expense-calculating methodology under IFRS 17
    • Reinsurance:
      • L/H RI: profitable business will be reflected in sustainably higher results;
        earlier recognition of earnings
      • P-C RI: operating result will largely remain unchanged,
        currently benefitting from increasing interest rates;
        substantially lower combined ratio under IFRS 17
    • ERGO:
      in general, slightly higher results expected
      • L/H Germany: CSM as a buffer ensuring higher earnings stability
      • P-C Germany: result currently benefitting from increasing interest rates,
        somewhat lower combined ratio under IFRS 17

    How will this affect Munich Re’s targets for 2023? How will this affect Munich Re’s Ambition 2025?

    Munich Re published media information on the profits target under IFRS 17 and on Ambition 2025.

    How much has the transition cost Munich Re?

    Group-wide, the costs were in the three-digit millions of euros. IFRS 17 affects more than 100 Group companies and more than 50 million insurance contracts, while IFRS 9 concerns over 200 billion euros in assets under management. More than 50 IT systems had to be modified or newly implemented in order to provide the required accounting data for our business.

    Excerpt Investor Day (IFRS 17)

    For Media inquiries please contact
    Stefan Straub
    Stefan Straub
    Head of Group Media Relations
    Axel Rakette
    Axel Rakette
    Irmgard Joas
    Irmgard Joas