Germany’s two largest insurance groups shrugged off the difficulties of record low interest rates and beat expectations by posting first-quarter earnings that were a quarter better than at the same stage last year.

Allianz and Munich Re said they were well on course to meet full-year forecasts but did not raise targets, with Michael Diekmann, Allianz’s chief executive, saying market risks remained a concern.

Allianz is Germany’s largest primary insurer by revenues while Munich Re – where US investor Warren Buffett is the biggest single shareholder with an 11 per cent stake – is the largest of Europe’s reinsurers, which are used by primary insurers to offload risks.

Low interest rates are reducing returns that insurers and reinsurers usually rely on generating from their investment portfolios. They are also deterring insurers’ customers from buying life assurance policies as a savings vehicle. Munich Re’s return from its €216bn portfolio, which is mainly invested in bonds, fell more than 10 per cent in the quarter to €2bn. The group said it expected a relatively low return on investments this year of about 3.3 per cent, with lower gains from sales than in the first quarter, when it made a 3.6 per cent return.

But Munich Re said losses from big incidents or natural catastrophes were lower than expected, improving profitability in property and casualty reinsurance.

Jörg Schneider, Munich Re’s chief financial officer, said: “There happened to be lower claims burdens from major losses, but the group’s operating earnings also proved to be robust.”

Net income rose 25 per cent from €782m to €979m from revenues that were virtually stable at €13.3bn.

“After this good start, we are optimistic of achieving our profit target for the year of close to €3bn,” Mr Schneider said. “The result . . . should not be simply extrapolated for 12 months. But . . . we have taken a pleasing step towards our result target.

“Furthermore, we continue to see profitable growth opportunities, particularly in markets like Asia-Pacific, for which we are well positioned.”

Mr Diekmann said Allianz’s improvements came from all business segments and were “broad-based”.

“We are well on our way towards achieving our operating profit outlook for the entire year [but] the board . . . sees no need for an adjustment of our outlook for fiscal year 2013,” Mr Diekmann said. Allianz told investors at Tuesday’s annual meeting that operating profits should be more or less in line with last year’s, at between €8.7bn and €9.7bn.

Allianz first-quarter revenues rose more than 6 per cent over the past year to €32bn. Operating profit rose 20 per cent to €2.8bn and net income rose 24 per cent from €1.4bn to €1.7bn.

Shares in Allianz were 3.56 per cent higher at €120.70 at close of trading, the shares’ highest level in almost five years.

Shares in Munich Re, which last month were at their highest in more than a decade, were 0.88 per cent higher at €149.00.

However, shares in Hannover Re, Germany’s second-largest reinsurer by revenues, slipped almost 3 per cent after net income fell 15 per cent in the quarter. Revenues rose 7 per cent and Hannover Re said it remained on track for its expected €800m of annual net income.

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