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Munich Re Sees First-Quarter Profit Fall on Lower Rates

Munich Re, the world’s biggest reinsurer, said first-quarter profit declined 7 percent as reinsurance rates are falling.

Profit in the quarter slipped to about 900 million euros ($1.2 billion) from 972 million euros a year earlier, Chief Executive Officer Nikolaus von Bomhard said in a copy of a speech handed to reporters at the company’s annual shareholders’ meeting in Munich today.

Munich Re expects profit of 3 billion euros this year, down from the 3.3 billion euros reported for 2013, as rates reinsurers charge their clients are falling for a second year in a row. Reinsurers, who help primary insurers shoulder risks, are increasing payouts to investors as strong balance sheets and lower-than-average losses from natural disasters lead to an abundance of capital available for coverage.

“The effects of the keener competition were clearly apparent, we cannot completely detach ourselves from this trend,” von Bomhard said.

The strong supply of capital brought rates for property-catastrophe policies down 11 percent in January, while prices also fell for most other types of coverage, according to Guy Carpenter, the reinsurance broker of Marsh & McLennan Cos. Prices continued to fall in the April renewals, broker Willis Re said earlier this month. Reinsurer capital reached a record $540 billion at the end of last year, according to a report by Aon Benfield, the reinsurance broker of Aon Plc.

Munich Re, which completed a 1 billion-euro share buyback before today’s shareholders meeting, plans to buy back shares worth another 1 billion euros before next year’s gathering. The reinsurer scrapped similar plans after the earthquake and tsunami in Japan led to the firm’s first quarterly loss since 2003.

Munich Re is due to report first-quarter earnings May 8. The shares rose 6 percent this year, giving the company a market value of about 30 billion euros.

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