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Munich Re First-Quarter Profit Jumps on Reinsurance Revenue

Munich Re, the world’s biggest reinsurer, said first-quarter profit jumped 25 percent, beating estimates, after reinsurance revenue rose and accident claims slumped.

Net income climbed to 972 million euros ($1.27 billion) from 780 million euros a year-earlier, the Munich-based company said in an e-mailed statement today. That compared with a 932 million-euro median estimate of seven analysts surveyed by Bloomberg.

Munich Re, led by Chief Executive Officer Nikolaus von Bomhard, is benefitting from the absence of major catastrophes and stable prices. While lower interest rates from bonds depress revenue across the industry, prices will be unchanged this year, according to a report from Aon Benfield, the world’s largest reinsurance broker.

“There happened to be lower claims burdens from major losses, but the group’s operating earnings also proved to be robust,” Chief Financial Officer Joerg Schneider said. “After this good start, we are optimistic of achieving our profit target for the year of close to 3 billion euros.”

Munich Re’s shares rose 1.2 percent to 149.60 euros at 9:16 a.m. in Frankfurt trading, valuing the company at 26.8 billion euros. That compared with a 0.8 percent increase for the 28-company Bloomberg Europe 500 Insurance Index and a 1 percent advance for Zurich-based Swiss Re Ltd, the world’s second-biggest reinsurer.

Accident Claims

Profit at the firm’s reinsurance unit surged 30 percent to 827 million euros in the first quarter. Premium income advanced 1.8 percent to 7 billion euros. Natural catastrophe losses were 24 million euros compared with 41 million euros a year previously, while man-made losses fell to 81 million euros from 223 million euros.

“Munich Re does not anticipate any rapid or significant rise in capital market interest rates in 2013, so regular income from investments is likely to be relatively low,” the company said in the statement.

Investment income fell to 2 billion euros from 2.24 billion euros in the first quarter of 2012, matching the median estimate of nine analysts surveyed by Bloomberg. A return on investments of 3.6 percent for the quarter compares with a full-year target of about 3.3 percent.

“The strains on investment income will increase during the course of the year if interest rates remain at record lows,” Christian Hamann, an analyst with Hamburger Sparkasse who recommends buying the shares, said by telephone today.

The company’s combined ratio in property and casualty reinsurance improved to 86 percent from 95 percent a year ago. A ratio above 100 percent means claims and costs exceed premium income, leaving a loss from underwriting.

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