Munich Re bullish on earnings after Q3 profit leap

MUNICH • Munich Re, the world's biggest reinsurer, says it will probably exceed its full-year earnings target "significantly" after third-quarter profit rose 32 per cent, helped by fewer losses from natural disasters.

Net income increased to €685 million (S$1.07 billion) from €520 million a year earlier, the company said in a statement yesterday.

Analysts had expected earnings of €750 million.

"We are now more optimistic about our profit guidance," chief financial officer Joerg Schneider said in the statement.

Munich Re, led by chief executive officer Nikolaus von Bomhard, said major losses from disasters were "clearly below expectation" in the first nine months of the year with a bill of €920 million. That compares with a budget of about €2 billion for major claims that Munich Re has set aside for this year.

The reinsurer had previously aimed for full-year earnings of €2.3 billion, a target that it reduced earlier this year after losses on equities and a restructuring of its primary insurance unit.

Like other reinsurers, Munich Re has been struggling with subdued demand amid fewer natural catastrophes since the 2011 earthquake and tsunami in Japan, and as record-low interest rates curb investment returns.

Income from Munich Re's €242 billion of investments rose 5.7 per cent to €1.6 billion, helped by fewer realised losses.

The company said pressure on reinsurance had eased slightly in recent renewals. Rates declined in eight of the past 10 years, according to the Guy Carpenter World Property Catastrophe Rate-on-Line Index.

"We continue to adhere to our strict underwriting discipline," Mr Schneider said. "Profit has always come before growth for us."

Munich Re reported earnings before the start of regular trading in Frankfurt. The shares have declined 5.3 per cent this year up to Tuesday, valuing the company at €28 billion.

Munich Re's combined ratio at its biggest unit, property and casualty reinsurance, improved to 92.5 per cent in the quarter from 94.5 per cent a year ago. The ratio measures premium income against claims and costs. A ratio higher than 100 per cent means a carrier is making a loss from underwriting.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on November 10, 2016, with the headline 'Munich Re bullish on earnings after Q3 profit leap'. Print Edition | Subscribe