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Last updated: August 7, 2012 9:31 pm
Munich Re said it was on track to beat its profit forecasts for this year after a lower burden of catastrophe claims for the reinsurance group, the world’s largest by premiums.
A better return from its investments also helped Munich Re beat analysts’ forecasts and raise net income for shareholders for the second quarter from €736m a year ago to €808m, on gross premiums that rose 5.5 per cent to €12.6bn.
Last year the reinsurer faced costly claims from earthquakes in Japan and New Zealand and had to take substantial writedowns on holdings of Greek government debt. On Tuesday Munich Re detailed only the expected cost of claims related to drought-induced crop failures in the US, saying they would reach a net €160m before tax.
Nikolaus von Bomhard Bomhard, chief executive, said Munich Re faced a greater challenge from low interest rates – which affect its investment returns – than from volatile financial markets or the deteriorating global economy.
After net income of €1.6bn in the first six months, Munich Re was on track to “slightly surpass” its target of €2.5bn for the year, Mr von Bomhard said.
Munich Re also raised expectations for its annual volume of premiums, saying they would now be between €50bn and €52bn compared with a previous forecast of €48bn-€50bn.
In the second quarter, income from reinsurance rose 23 per cent to €659m, but quarterly profits from Munich Re’s primary insurance operations, where the company said last month that it would cut up to 1,350 jobs, fell more than 18 per cent to €150m.
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