LA Wildfires Spend $1.9 billion in the first quarter

Germany's largest reinsurer made $1.9 billion in profits in claims related to the recent Los Angeles wildfires.

MunichThe world's largest reinsurer said on Tuesday that all claims expected to cause wildfires totaled about €1.1 billion. at the same time, Hannover REThe world's third largest reinsurer said its largest net personal losses were €631.4 million behind wildfires.

The wildfire costs of the two companies totaled about 1.73 billion euros, or $1.9 billion.

Reinsurance companies provide policies for major insurance providers, who usually deal directly with local clients. Reinsurance policies are typically absorbed by major insurance providers only in about €444 million (USD 444 million).

About 80% of Munich RE's claims are in the company's property-recreation sector, while about 20% attacked the company's global professional insurance sector. Among the two divisions of the business, Los Angeles Wildfires was the largest single claim activity in the three months to March.

The influx of wildfire claims has pushed Munich Re's property-recreation sector to more than triple overall spending, thus reducing the division's quarterly net profit to 72%, down €343 million.

In the company's global professional insurance division, net profit lost 95% to 8 million euros.

Despite the blow, the organization's total net profit was 1.1 billion euros, down 48% from the previous year.

CFO Christoph Jurecka acknowledged that Munich was “not unscathed from the devastating wildfires in Los Angeles” but believed that the group’s revenue showed the resilience and “cautious management” of the company’s business portfolio.

“We adhere to the €6 billion profit guidance for fiscal 2025 – thanks in large part to the ongoing market conditions and the high quality of the portfolio,” he said in the company's first quarter report.

Shares of Munich RE and Hannover RE both fell 4% on Tuesday afternoon, making it the worst company on the European Stoxx 600 index.

Hannover RE also reported a decline in net profit for the quarter, down 14% from the previous year to 480.5 million years.

“The huge loss payments in the first quarter reached €764.7 million, which was paid by California wildfires, and therefore significantly higher than the envisioned large loss budget of €435 million,” Hannover said in its quarterly statement.

In the notes Tuesday morning, analysts at RBC Europe said their sentiment towards Munich was negative, although they noted that the company's total wildfire losses were “less than the 1.2 billion euros of the previously indicated monetary effects and positive effects of anti-reverse transcription”.

Analysts at Royal Bank of Canada (RBC) said the company's target price is 559 euros – with little change from the current price.

Meanwhile, analysts at JP Morgan said they have a neutral stance on Munich RE, with a price target of €530.

“Although the omissions on expectations are small, we will only see limited potential for downgrades given the limited scale of failure to reach consensus,” they said.

Deutsche Bank analysts said on Hannover RE that the company's strong investment performance helped it achieve quarterly net revenues of 7% higher than consensus.

The lender's buy rating for Hannover RE shares is 279 euros, with a premium of about 4% of the current price.