(Reuters) — Munich Reinsurance Co. reported an almost 5% drop in net profit in the first quarter, as a strong euro dragged down premium income.

"Despite negative currency effects, we almost matched the outstanding result of the first quarter last year," Chief Financial Officer Joerg Schneider said in a statement on Thursday.

Group gross written premiums fell 2.7% to €12.9 billion ($17.76 billion), the company said.

A Munich Re spokeswoman said euro strength primarily against the U.S., Canadian and Australian dollars in the first three months had undermined reinsurance premiums, which would have risen by 4.5% if the exchange rates had remained stable.

Euro strength is now expected to cut about €2 billion ($2.78 billion) off gross premiums in 2014, bringing them to about €48 billion ($66.59 billion).

Munich Re and peers such as Swiss Re Ltd. and Hannover Re S.E. are also battling fierce competition from alternative capital investors such as pension funds, which are helping to drive down prices in the reinsurance market.

Munich Re said prices fell by about 8% when its portfolio of contracts with insurance companies in Japan and North America were renewed in April, although it said it had managed to achieve higher profitability than it had expected.

Quarterly net profit after minorities fell to €919 million ($1.27 billion) — benefiting from lower taxes — from €963 million ($1.23 billion) a year earlier, Munich Re said.

"We were largely spared major losses," Mr. Schneider said in the statement.

"The first-quarter results were slightly below expectations," said Equinet Bank analyst Philipp Haessler in a note to clients.

"The April renewals were slightly down which is no surprise given the soft market environment," he said, adding that he was maintaining his "hold" recommendation on the stock.

The reinsurer reiterated its target of earning net profit of €3 billion ($4.16 billion) in the full year.

Its shares were down 1.5% to €156.70 ($217.39) at 0717 GMT, lagging a 0.4% decline in the STOXX Europe 600 insurance index.