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Shares in Munich Re are lower after the company said it would buy back more shares and predicted that earnings this year would dip in the face of falling reinsurance prices and persistently low interest rates.

Having launched a €1bn share buyback last year, Munich Re said on Wednesday that it would buy a further €1bn by its annual shareholder meeting next year.

“We have no problem with buying back shares. If we think that is the best option for our shareholders, we don’t go green about the gills, we buy our shares back,” said Nicholas von Bomhard, chief executive.

Shares in the reinsurer fell 1.2 per cent to €177.10, making it one of the worst performers in both Germany’s Dax 50 index and the Eurostoxx 50 on Wednesday.

Competition has put pressure on reinsurance groups in recent years, with reinsurance prices falling 30 per cent globally since 2011, making it harder to find profitable opportunities to deploy their capital.

Presiding over his last set of results before handing over to Joachim Wenning next month, Mr von Bomhard acknowledged that 2017 would be a “challenging” year, and said that weak reinsurance markets and low interest rates would between them knock between €200m and €300m off the group’s earnings.

“We won’t desperately either use our reserves to fill the gap or take on extra risk. We will shrink, keep our powder dry, and then come back,” he said. “Our investors know this, and appreciate it.”

As a result, Munich Re will aim for a net profit of between €2bn and €2.4bn in 2017, assuming the incidence of big natural and man-made disasters remains within normal bounds, and that there are no severe moves in currency or capital markets. The group said in February that it made a profit of €2.6bn last year.

Copyright The Financial Times Limited 2017. All rights reserved.
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