Munich Re expects up to €2.5bn profit in 2018

Munich Re is expecting to generate a profit of between €2.1 billion and €2.5 billion in 2018.

This slightly exceeds the guidance that the company had projected for 2017, which was initially set at between €2.0 billion and 2.4 billion.

“Munich Re is again poised for growth,” said CEO Joachim Wenning. “Our target for 2018 is slightly higher than the profit guidance for the previous year. ERGO is making steady progress with the Strategy Programme, and our growth initiatives in reinsurance are benefiting from tailwinds as prices rise. We are investing heavily in digitalisation and are cutting costs to prepare for digital transformation and make Munich Re fit for the future.”

For 2017, Munich Re reported a group consolidated result of €392 million compared to €2.58 billion in 2016. 2017 was one of the most loss-affected years in the history of the company due to high levels of natural catastrophes.

The profit guidance for 2018 is again subject to major losses being within normal bounds. In property/casualty reinsurance, Munich Re is aiming for a combined ratio of around 99 percent in 2018.

In life and health reinsurance, the technical result is expected to amount to at least €475 million in 2018.

For its primary insurance unit ERGO, Munich Re projects a consolidated result of between €250 million and €300 million. The combined ratio for the ERGO property/casualty Germany segment should be around 96 percent in 2018. In the ERGO International segment, the target is a combined ratio of around 97 percent.

Overall, Munich Re expects interest rates to increase slightly in 2018, especially in the US, where it transacts a lot of reinsurance business. Accordingly, the reinsurance field of business should see an end to the falling running yield this year. However, a rise in interest rates would reduce valuation reserves and generally lead to lower gains on disposal. Altogether, Munich Re expects an investment result of slightly more than €7 billion, representing a return on investments of about 3 percent.

Assuming exchange rates remain stable, the group anticipates that its gross premiums written for the 2018 financial year will be in the range of €46 billion and €49 billion. Gross premium in 2018 is expected to be in the order of €29 billion and €31 billion for the reinsurance field of business, and €17 billion to €18 billion for the ERGO field of business.

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