Munich Re’s Q1 profits expected to fall on lower reinsurance prices

by Artemis on April 30, 2014

The world’s largest reinsurance company Munich Re is expecting its first quarter profits to be down approximately 7% year on year, with the reduction in reinsurance rates and pricing the key factor showing that even the largest players are not immune the competitive market.

Munich Re intends to focus increasingly on the very large and tailored side of re/insurance, providing large capital relief solutions to clients and designing covers and products that are very hard to replicate without the scale the firm has achieved. Only a few reinsurers in the world can offer these types of products, but even with the ability to shift focus to areas such as this and primary insurance Munich Re still feels the pressure.

Net profit for the first quarter is expected to come in at around €900m, said Munich Re board member Nikolaus von Bomhard, down from the €1.2 billion earned a year earlier.

While Munich Re has recently sought to remain unphased by the increasing competition in reinsurance, from both traditional and alternative sources of capital, saying that it would not be affected due to its scale and diversity, von Bomhard admitted that it cannot completely detach itself from market trends.

Capital management is clearly high on the agenda as Munich Re is now planning to buy back another billion euros of its shares over the next year, perhaps demonstrating that capital deployed into new reinsurance business is currently not as valuable to Munich Re as investing in its own business.

Munich Re still expects its full year results to remain on track, with a target of €3 billion stated.

Munich Re officially announces its first quarter results next week, the comments today were from its annual general meeting. The reinsurer will not be the only European player to report a reduction in profit for the quarter. However as it adjusts its focus and begins to recoup the benefits from so doing it will be hoping to at least maintain profits in quarters to come.

Read other recent articles on Munich Re:

Consolidation ahead for smaller reinsurers: Munich Re CFO.

Munich Re on competition and alternative reinsurance capital.

Munich Re: Reinsurance market competitive as capital spills over.

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