Munich Re raises outlook
Munich Re, the world's biggest reinsurer, expects to exceed its full-year profit target after higher investment income helped second-quarter earnings beat analyst estimates.
Net income rose to €808 million from €736 million a year earlier, the Munich-based reinsurer said in a statement today.
With first-half profit of €1.6 billion, Munich Re is on course to "slightly surpass" its full-year target of about €2.5 billion, according to chief executive officer Nikolaus von Bomhard.
The reinsurer, which last month announced 1,350 jobs cuts at its Ergo Versicherungsgruppe insurance unit, also boosted its full-year forecast for gross premium income.
"Gross premium income was quite strong and underlying profit was strong as well," said Philipp Haessler, an analyst at Equinet in Frankfurt who has a hold rating on the stock.
"Munich Re remains solid like a rock."
Munich Re climbed 0.9 per cent to €118.60 as of 10:45 am in Frankfurt trading, bringing this year's gain to 25 per cent
Investment income rose almost 17 per cent to €1.8 billion after writedowns on Greek government debt in the year- earlier quarter weren't repeated.
The reinsurer reduced investments in southern European sovereign bonds.
Holdings of Italian debt fell to €2.4 billion from €5.3 billion a year ago, while Spanish debt declined about 40 per cent to €1.2 billion.
Low interest rates continue to depress income from the reinsurer's fixed-income investments.
"The challenges of the still very low interest rate levels are far greater than the volatility of the financial markets or the worsened economy," Munich re said in the statement.
The firm's reinsurance unit's operating profit rose 43 per cent to €796 million, helped by higher prices for natural catastrophe cover and below average damages.
Munich Re, which raised rates in the July renewal round by about 2 per cent, expects stable prices in 2013.