BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.

To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.

To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.

Login Register Subscribe

Damage claims endanger Munich Re's 2011 profit goal


MUNICH (Reuters)—Heavy damage claims from an earthquake, floods and a storm this year will put Munich Reinsurance Co.'s full-year profit goal at risk if claims do not subside in coming quarters.

The world's biggest reinsurer said on Thursday it hoped to keep net profits steady at around €2.4 billion ($3.36 billion) in 2011, but that floods and a storm in Australia, along with a devastating earthquake in New Zealand in the first quarter, posed a major threat.

The losses have already exhausted the €1 billion ($1.40 billion) budget penciled in for natural catastrophe losses this year, CEO Nikolaus von Bomhard told a news conference.

"The company will carry on but it does make reaching the profit target more difficult," he said.

However, investment results, smaller claims and the expectation that insurance unit Ergo would earn as much as €550 million ($769.2 million) this year, after €355 million ($496.5 million) in 2010, would also be important factors in the group's full-year result.

"It is not the moment to give up the profit target," Mr. von Bomhard said.

Earlier on Thursday, Munich said reaching the profit goal depended on natural catastrophe damage claims being lower than average in the remainder of the year.

Reinsurers typically face their heaviest claims in the second half, when hurricanes in the Atlantic reach their peak.

Chief Financial Officer Joerg Schneider said it was too early to say whether the Australia-New Zealand damage claims would cause an overall loss in the first quarter.

"Other business areas are running satisfactorily, capital markets have not been extremely volatile of late and we get a tax break whenever there are big losses," Mr. Schneider said, adding that reinsurers tend to focus more on the long term than on quarterly developments.

Munich Re shares were down 2% at €116 ($162.24) by 1225 GMT, when the STOXX 600 Europe insurance sector index was off 1.6%.

Share prices for reinsurers have sagged since the deadly Feb. 22 earthquake in Christchurch, New Zealand, which industry estimates suggest could bring insurance claims of up to $12 billion.

Munich Re said its preliminary estimate for its losses from the New Zealand quake was around $1 billion Australian ($1.01 billion).

The company has taken the biggest hit so far from New Zealand among the top reinsurers, but DZ Bank analyst Thorsten Wenzel said the damage could have been worse.

Positive surprise

"We had expected the losses from the New Zealand earthquake to be at around €1 billion. Therefore Munich Re's loss estimate comes as a positive surprise," Mr. Wenzel said in a research note.

Swiss Reinsurance Co. Ltd., the world's second-biggest reinsurer, expects around $800 million in claims from the magnitude 6.3 quake, while No. 3 reinsurer Hannover Reinsurance Co. said its loss would be capped at around €150 million ($209.8 million) because it can shift excess claims to other reinsurers or financial market investors.

Bermuda-based Catlin Group Ltd. said it expected the quake to cost it around $125 million.

Munich Re shares have fallen over 5% since the earthquake, while Swiss Re shares are down 6.8%.

Munich Re said it expected flooding in Brisbane to cost it $350 million Australian ($354.8 million), while Cyclone Yasi, which also hit Australia, would cost it around $135 million Australian ($136.9 million).

Data from Thomson Reuters StarMine, which weights analysts' forecasts according to their track record, put Munich Re shares trading at 8.9 times forecast earnings, while Swiss Re's are on a multiple of 9.8 times and Hannover Re's are at 7.9 times.

Munich Re confirmed on Thursday that net income for 2010 fell 5% to €2.4 billion ($3.36 billion). The reinsurer had already reported key 2010 data on Feb. 3.

Read Next

  • Munich Re sees Solvency II fixes by 2013 deadline

    MUNICH (Reuters)—Munich Reinsurance Co. is confident insurers and regulators can improve new risk-capital rules for the insurance industry in time for the scheduled 2013 start, its finance chief said on Thursday.