Munich Re Posts $2.95 Billion H1 Net Profit; Raises Earnings Forecast

Munich Re reported strong six month results with net profits up to €2.132 billion ($2.95 billion), despite a slight downturn in gross premiums written to €18.928 billion ($26.166 billion) compared to €19.063 billion ($26.353 billion) in the first half of 2006.

Nikolaus von Bomhard, Chairman of the Board of Management, expressed his satisfaction with the results, noting that the Group had already reached important milestones outlined in its “Changing Gear Program,” launched in May. “We have made such good progress to date,” he continued, “that we are increasing our profit guidance and, with the one-off income resulting from the tax reform, are even setting our sights on a new record result.”

Munich Re’s new profit guidance for 2007 is between €3.5 and €3.8 billion ($4.84 to $5.25 billion). The Group “aims to achieve a return of at least 15 percent on risk-adjusted capital (RORAC) again in 2007,” said the bulletin.

At several points the earnings report noted the effect of currency exchange rates. As much of the giant reinsurer’s business is priced in dollars, the strength of the Euro – it’s currently around $1.38 – reduced income figures when converted to euros.

The report also noted – as part of the “Changing Gear Program-” the “acquisition of the underwriting manager Bell & Clements Group, new coverage concepts for natural hazards in the Caribbean, and the expansion of the cooperation between ERGO and UniCredit.” In addition Munich Re said:” The capital-efficiency measures that form part of Changing Gear have also been resolutely implemented: almost half of the share buy-back announced in May has been completed. To further improve its capital structure, the Group also placed a bond with a volume of €1.5 billion [$2.07 billion].”

Although gross premiums written in Munich Re’s reinsurance business sector declined by three percent – from €11.333 billion ($15.66 billion) in H1 2006 to €10.993 billion ($13.82 billion) – the announcement said “the consolidated result for reinsurance nevertheless reached €1.9 billion [$2.626 billion], an increase of 9.5 percent,” compared e1.8 billion ($2.488 billion) in the first half of 2006.

Reinsurance CEO Torsten Jeworrek explained: “The reinsurance markets remain attractive, but a selective underwriting approach is still required.” The Group is applying the maxim of “profitability before premium volume.” The maxim is evident in the treaty renewals in property-casualty business as of July 1 (parts of the US portfolio, Australia and the Latin American markets), said Jeworrek. “We have succeeded in acquiring profitable business, which has led to a rise of approximately 9 percent in premium volume from those markets,” he added.

Munich Re also reported that its primary insurers “again presented good figures, with an operating result of €610million [$843 million] (€793 million [$1.096 billion]) and a profit of €410 million [$566 million] (€446 million [$616.5 million]). The ERGO Insurance Group, which writes about 94 percent of the gross premiums in Munich Re’s primary insurance segment, posted a profit of €403 million [$557 million],” compared to €448 million ($619.3 million).
The full report, analysts/investors presentation and additional comments may be obtained on the Group’s web site at: www.munichre.com.

Source: Munich Re