Munich Re forecasts decline in 2014 profits
Munich Re has said it expects its profits to decline this year due to growing competition in reinsurance, changes in demand from insurers and the ongoing low interest rate environment.
The world’s biggest reinsurer said it anticipates a profit of €3 billion in 2014 compared with the €3.3 billion it made in 2013. But its CEO also acknowledged that even this €3 billion target could be ambitious.
It also said it expects its gross written premiums to fall to around €50 billion compared with the €51.1 billion it wrote in 2013.
Nikolaus von Bomhard, the chief executive of Munich Re, said €3 billion could be an ambitious objective given the challenges in the market. In particular, he highlighted the continuation of low interest-rate levels meaning lower regular income from investments.
In addition, the company stated, a normal tax burden is expected again for 2014, after Munich Re posted a very low effective tax rate in 2013 due to the recalculation of tax for prior years and the utilisation of losses being carried forwards.
“The result for 2013 is an indication of how we have positioned ourselves competitively – we have strategically prepared Munich Re for foreseeable challenges which we can now tackle from a position of strength,” said von Bomhard.
The company stated that these challenges include the lingering low-interest-rate environment, increasing competition in reinsurance, and changes in demand from clients in primary insurance.
“We have done our homework in recent years. Our capital base is more than solid, in reinsurance we are committed to solution-finding competence, and in primary insurance we are bringing a visionary concept to the German market with our new generation of life insurance products,” said von Bomhard.
Munich Re also said it plans to buy back shares worth €1 billion before the 2015 annual general meeting. The buy-back is conditional on no major upheavals occurring on the capital markets or in underwriting business.
The supervisory board also adopted the board of management’s proposal to increase the dividend for the financial year 2013 to €7.25 per share.
