Munich Re Q1 Profit Down 19% to $1.2 Billion; Maintains 2008 Profit Targets

The Munich Re Group recorded a profit of €785 million ($1.2 billion) for the first quarter of 2008, down 19 percent from the €974 million ($1.495 billion) in the same period of 2007. The Group’s Operating result, which excludes finance costs and taxes on income, dropped 12 percent to €1.151 billion ($1.766 billion), compared to €1.313 billion ($2.01 billion) in Q1 2007.

Munich Re cited the significant decrease in its investment results – down 46.6 percent to €1.687 billion ($2.59 billion) from Q1 2007’s €3.161 billion ($4.85 billion) – as well as increases in the cost of claims and currency fluctuations as the main reasons for the decline.

CFO Jörg Schneider nonetheless affirmed: “We are adhering to our most important target for 2008: to achieve a return on risk-adjusted capital of at least 15 percent, which means a profit of €3.0-3.4 billion [$4.604 billion to $5.218 billion].”

He added that the Group’s “‘Changing Gear Program’ is going well,” indicating, “with our active cycle management, innovative business initiatives and attractive payouts, we are right on track.” Munich Re’s objective is to generate a profit of more than €250 million ($383.6 million) from new reinsurance activities by 2010 and to raise earnings per share to over €18 ($27.62), excluding any positive one-off effects.

Munich Re also confirmed that its “share buy-back program will be continued. Further shares with a volume of at least €1billion [$1.553 billion] are to be repurchased – as announced – before the Annual General Meeting in 2009.”

Gross written premiums from Munich Re’s reinsurance activities were down 5.6 percent to €5.492 billion ($8.431 billion) from €5.82 billion ($8.935 billion) in Q1 2007. The combined ratio rose to 103.8 percent during the period from 101.8 in Q1 2007.

However, in primary insurance, mainly the ERGO Insurance Group, which writes more than 93 percent of the gross premiums in Munich Re’s primary insurance segment, gross written premiums were up by 0.9 percent to €4.803 billion ($7.373 billion), and the combined ratio in the P/C sector declined substantially from102.1 percent to 89 percent.

Schneider stressed the benefits of the Group’s integrated business model of primary insurance and reinsurance: “In addition to the value and cost synergies we leverage, we are also saving significant capital costs by balancing risks across the two business segments.” In total, the Group’s risk-based capital requirements are nearly €2 billion ($3.07 billion) lower than if primary insurance and reinsurance were transacted by separate companies.

The full report as well as a replay of the earnings conference presentation may be obtained on the Group’s web site at: www.munichre.com.

Source: Munich Re