Munich Re boosted by decline in big claims

Munich Re lifted its earnings forecast for the year after a drop in big claims helped it post a 31 per cent rise in net profit for the third quarter.

The world’s largest reinsurer said that in the three months to the end of September, net profits came in at €685m, up from €520m in the same period a year earlier. That was slightly below analyst expectations of €688m, according to a Reuters poll.

Jörg Schneider, chief financial officer, said that Munich Re was “well on track” and “now more optimistic about our profit guidance”.

The German group began the year forecasting a net profit of between €2.3bn and €2.8bn, then lowered its sights to €2.3bn in May to take into account a weak first quarter and the costs of overhauling its primary insurance business, Ergo.

On Wednesday, it said that it now expects profits of “significantly” more than €2.3bn.

However, shares fell more than 3 per cent amid broad losses among financial stocks in reaction to Donald Trump’s victory in the US presidential election.

Munich Re’s third-quarter revenues fell 1.1 per cent year-on-year to €12.3bn as the reinsurer was hit by unfavourable exchange rate movements. Factoring out currency moves, they were up 0.2 per cent.

Mr Schneider said that the market environment remained “challenging”, but the group now expected a “stabilisation”.

He added that the pressure on prices, terms and conditions that has weighed on the industry in recent years had begun to ease off “slightly” in recent rounds of policy renewals.

He insisted that Munich Re would continue to take on only business that was profitable. “We continue to adhere to our strict underwriting discipline — as profit has always come before growth for us,” he said.

Munich Re’s best-performing division was its reinsurance arm, where net profit surged to €692m, up 82 per cent on the same period a year earlier, helped by an relatively low incidence of big losses. The group said that it expected the impact of Hurricane Matthew, which hit the Caribbean and the east coast of the US in October, to be in the “low triple-digit million euro range.”

Munich Re’s health insurance business posted a net profit of €44m. However, Ergo, which is in the throes of a four-year restructuring programme designed to improve the unit’s profitability, posted a net loss of €52m, down from a profit of €100m a year earlier. Markus Riess, Ergo’s chief executive, conceded that the group still had hard work ahead but added that it was making progress.

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