-- Munich Re posts profit rise on lower costs for weather
claims, crisis
-- Company says on track to "slightly surpass" previous
full-year profit guidance
-- Sector recovering from costliest disaster year on record in
2011
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By Ulrike Dauer
MUNICH--Germany's Munich Re AG (MUV2.XE) Tuesday reported a 9.8%
rise in second-quarter net profit, helped by substantially lower
costs for severe weather damage and the absence of impairments on
Greek sovereign debt that weighed on last year's results.
Munich Re, the world's largest reinsurer by premium revenue,
also lifted investor hopes for topping the full-year guidance for
profit and revenue, saying the results achieved between January and
June put it on track for coming out slightly above its full-year
goal of around 2.5 billion euros ($3.1 billion) after-tax profit,
including minorities.
"With a profit of EUR1.6 billion for the first half year, we
have achieved well over half of our target of around EUR2.5
billion. So we are well on track to slightly surpass the originally
envisaged profit for the year," Chief Executive Nikolaus von
Bomhard said.
For gross premium revenue, Munich Re now expects between EUR50
billion and EUR52 billion, up from the previous forecast of EUR49
billion to EUR51 billion range. Both higher forecasts are due to
expected improvements in the reinsurance operations.
Net profit, excluding minorities, rose to EUR808 million from
EUR736 million, above of a Dow Jones Newswires consensus poll of
EUR685 million. Analysts had generally expected a return to a
"normal" tax rate of around 30%, but it remained around last year's
level of 15% when it was lowered due to deferred taxes for losses
in previous years and disaster claims.
Gross premium revenue rose 5.5% to EUR12.63 billion, below the
forecast EUR12.56 billion.
Net investment income rose 19% to EUR1.81 billion, below the
forecast EUR1.93 billion. Operating profit, which many investors
consider a better reflection of a company's actual performance, was
EUR1.10 billion compared EUR947 million a year earlier, slightly
below the forecast EUR1.11 billion.
Last year around this time, Munich Re's investment result took a
EUR703 million hit from the company's writing down the entire Greek
sovereign debt in its portfolio to market value as of June 30. This
burdened the quarterly after-tax profit by EUR125 million.
Also a year ago, the sector was hit by the slew of large
disasters that exhausted annual claims budgets for 2011 in the
first quarter and made it the costliest year on record.
Major losses cost Munich Re EUR3.64 billion in the first six
months last year. This year, year, that figure was EUR716 million,
below what Munich Re considers the long-term average.
Merck Finck analyst Konrad Becker called the figures "good, as
expected," helped by a significant reduction in costs for claims
and lower euro sovereign-debt crisis hits, which improved the
investment result. But he also called positive the outcome of July
renewals, which added 18.5% in premiums and 2% average price
rises.
Munich Re competes with peers such as Swiss Re AG (SREN.VX),
Hannover Re AG (HNR1.XE) and Scor SE (SCR.FR) for business with
primary insurers seeking to spread risks on their books further.
Peers will report Thursday and Friday and are also expected to flag
low claims and a decent contribution from investments.
At 0713 GMT, Munich Re shares were up EUR0.45, or 0.4%, at
EUR118.05, outperforming the wider market, which was flat.
-Write to Ulrike Dauer at ulrike.dauer@dowjones.com