Munich Re expects to beat profit target

First-half profit of €1.6b puts reinsurer on course to surpass full-year estimate of €2.5b

Munich Re, the world’s biggest reinsurer, expects to exceed its fullyear profit target after higher investment income helped second-quarter earnings beat analyst estimates.

Net income rose to €808 million (Dh3.68 billion) from €736 million a year earlier, the Munich-based reinsurer said in a statement yesterday. That beat the average €718 million estimate of 18 analysts surveyed by Bloomberg.

With first-half profit of €1.6 billion, Munich Re is on course to “slightly surpass” its full-year target of about €2.5 billion, according to chief executive officer Nikolaus von Bomhard.

The reinsurer, which last month announced 1,350 job cuts at its Ergo Versicherungs- re said in the statement.

The firm’s reinsurance unit’s operating profit rose 43 per cent to €796 million, helped by higher prices for natural catastrophe cover and below average damages. Munich Re, which raised rates in the July renewal round by about 2 per cent, expects stable prices in 2013.

Loss from underwriting

The company’s combined ratio in property and casualty reinsurance improved to 96.9 per cent from 99.8 per cent a year ago. A ratio above 100 per cent means claims and costs exceed premium income, leaving a loss from underwriting.

Gross reinsurance premiums rose 8 per cent to €6.8 billion from €6.3 billion in the quarter, said Munich Re, which raised its full-year forecast by €1 billion from €27 billion to €28 billion.

Munich Re set aside provisions of €160 million in anticipation of losses from the drought in agricultural areas of the US.