Munich Re Quarterly Profit Falls 16% on Catastrophe Losses

Munich Re, the world’s biggest reinsurer, said profit fell 16 percent in the first quarter, after losses from natural catastrophes increased and returns from investments declined.

Net income dropped to 790 million euros ($898 million) from 936 million euros a year before, the Munich-based company said in a statement Thursday. Profit beat the 787.3 million-euro average of four analyst estimates compiled by Bloomberg.

Munich Re is among reinsurers seeing earnings pressured by falling prices and record-low interest rates. Still, the Munich-based firm is on track to meet a full-year profit target of 2.5 billion euros to 3 billion euros, Chief Executive Officer Nikolaus von Bomhard, 58, told shareholders last month. That compared with 3.2 billion euros reported for last year.

Expenditure for major losses increased to 255 million euros from 39 million euros a year earlier, Munich Re said. Windstorm Niklas, which crossed Europe at the end of March, cost 40 million euros. The largest man-made loss was 35 million euros paid for a fire at a U.S. refinery, the company said.

Investment income fell 8.6 percent from a year earlier to 1.82 billion euros.

Shares Lag

Munich Re’s shares have climbed 4.6 percent this year, giving it a market value of 29 billion euros. The Bloomberg Europe 500 Insurance Index gained 10 percent over that period.

The price property and casualty reinsurers charge primary carriers to backstop claims from catastrophes declined in seven of the last 10 years, according to the Guy Carpenter World Property Catastrophe Rate on Line Index.

Swiss Re AG, the world’s second-biggest reinsurer, unexpectedly reported an increase in first-quarter profit to $1.4 billion from $1.2 billion a year earlier on April 30, helped by returns from selling fixed income securities. Hannover Re, the third-biggest reinsurer, said yesterday that first-quarter profit rose 20 percent to 297.7 million euros, after higher earnings from life reinsurance and investments.

Markus Riess, who headed the German business of Allianz SE and lost the race for the CEO position to Oliver Baete, will join Munich Re’s management board with responsibility for primary insurance at Germany’s second-biggest insurer Ergo Versicherungsgruppe, the company said last month.

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