Munich Re, the world’s biggest reinsurance group, beat expectations for first-quarter results, thanks to windfall gains from the sale of big share stakes.
The group’s investment income rose by one-third to €2.5bn ($3.2bn), helping to lift net profits for the three months to the end of March by 27 per cent to €688m.
Jörg Schneider, finance director, said the sale of stakes in mortgage group BHW and conglomerate MAN had together contributed gains of €248m.
Munich Re’s gross premium income fell 2 per cent to €10.2bn, as the group continued to put “profit ahead of growth” by renewing business at unprofitable levels. In core non-life reinsurance, premium income fell 7 per cent to €3.9bn. But Mr Schneider dismissed criticism that Munich Re’s core business was declining and said there would be “no further significant reduction in premium income”.
The overall results were “very good”, he said. The stable 96.5 per cent combined ratio - a key measure of the cost of meeting claims and overheads as a proportion of premium income - was in line with the full-year target of 97 per cent. Nickolaus von Bomhard, chief executive, said: “I have no reason to doubt that we are on course for achieving our profitability objective, with a return on equity of 12 per cent after taxes in 2005.” That target equates to net profits of €2.4bn.
The group was “satisfied” with problem subsidiary American Re, which generated profits of $88m, up 9 per cent, in the first quarter. But Mr Schneider said remaining uncertainties about prior-year losses meant he could not rule out further reserve strengthening measures. American Re has absorbed more than $4bn to strengthen reserves on business underwritten between 1997 and 2001, particularly in the area of asbestos risks.
Munich Re shares were down 62 cents at €87.86 in morning trade.