Munich Re 2Q net profit falls 47 percent

FRANKFURT — Reinsurer Munich Re AG said Wednesday the company's second-quarter net profit fell by 47 percent amid market turmoil and asset write-downs of 889 million euros ($1.38 billion).

The Munich-based company said net profit in the April-June period fell to 599 million euros ($928 million) from 1.1 billion euros a year earlier. Gross premiums rose 1.2 percent to just more than 9 billion euros ($13.94 billion) compared with 8.9 billion euros a year ago.

Reinsurers sell backup coverage to other insurers, spreading risk so the system can handle large or widespread losses. Munich Re also operates Ergo, one of Germany's biggest insurers, and Munich Reinsurance America Inc.

Munich Re said its second-quarter return on investments fell nearly 40 percent to 1.6 billion euros ($2.5 billion) from 2.5 billion euros a year ago, while the company's operating profit for the second quarter fell 33 percent to 1 billion euros ($1.55 billion) from 1.5 billion euros in the same quarter a year ago.

Munich Re said those results were especially hit by price losses on stock exchanges and the falling value of the dollar, but that "given the turmoil on the financial markets, those are satisfactory."

For the first six months of the year, the company earned 1.4 billion euros ($2.17 billion), down 34.5 percent compared with nearly 2.1 billion euros in first half of 2007.

Gross group premiums written for the first half were down less than half a percent to 18.86 billion euros ($29.23 billion) from 18.93 billion euros, and the company said its total amount of write-downs on equities was 1.2 billion euros ($1.9 billion) from January-June, though the figure was offset by 1.1 billion euros in write-ups on derivatives and hedging.

The company said the reduction in gross premiums was directly attributable to the decline of the dollar's value, and that had exchange rates been the same as the first half in 2007, group gross premium volumes would have risen 4.4 percent.

Last month, the company issued a profit warning, backing off its previous forecast of full-year profit between 3 billion euros and 3.4 billion euros ($4.7 billion and $5.3 billion), saying it now expected lower earnings — though "still well above 2 billion," euros or $3.1 billion.

Munich Re blamed the lower results and the downward outlook on a high oil price, which was accelerating inflation worldwide, the dearth of growth in the U.S. and the euro zone, and the worldwide financial-market turmoil that is continuing to hurt prospects for the global economy.

He said the company was conservative in terms of its financial positions and stood to profit despite the market environment. Furthermore, the company is moving ahead with "profitable business initiatives," such as expansion in segments such as primary insurance.

"We identified the challenges of the future in good time," said Nikolaus von Bomhard, the chief executive of Munich Re in a statement.

Munich Re said its biggest natural catastrophes in the second quarter were the severe earthquake in the Chinese province of Sichuan, floods in the U.S. Midwest, and a windstorm in Germany, and 30 million euros to 40 million euros ($47 million to $57 million) was earmarked for each event.

The company said the biggest man-made loss events in the second quarter were a Moscow fire and a blaze at Universal Studios in California, for which another 30 million euros to 35 million euros ($47 million to $54.3 million) apiece was set aside.

Shares of Munich Re were up 1.7 percent to 112.26 euros ($173.86) in Frankfurt trading.

___

On the Net:

http://www.munichre.com

(This version CORRECTS Corrects gross premium figures, graf 2; UPDATES throughout with more detail on report, including wirte-down figures; ADDS company comment, share price, byline.)

Back To Top

	Deutsche Telekom 2Q profit down	Associated Press	Thu Aug 7	0
	BNP second quarter net profit drops 34 percent	Associated Press	Wed Aug 6	0
	SocGen second-quarter net profit drops 63 percent	Associated Press	Tue Aug 5	0