Munich Re, the largest global reinsurer, has raised its profit guidance compared with the previous year, and is expecting to generate a profit of €2.1–2.5bn for 2018. The Company also announced that it would buy back another €1bn worth of shares before the Annual General Meeting in 2019.
“Munich Re is again poised for growth. 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,”Joachim Wenning, Chairman of the Board of Management.
However, the reinsurer announced plans to cut 900 jobs, generating savings that also helped it to nudge up profit targets for this year and beyond.
Wenning, who had flagged job losses in February without giving details, said half of the cuts would be in Munich, Germany, and half in the United States.
The cuts at the company, which employs 42,000 people, would trim costs by €200 million ($247 million), he added.
Outlook for 2018: Group target of €2.1–2.5bn
Munich Re is aiming for a consolidated result of €2.1–2.5bn. This slightly exceeds the guidance that had been projected for the previous year (initial profit guidance for 2017: €2.0–2.4bn). As always, the profit guidance is subject to major losses being within normal bounds and to our income statement not being subject to severe fluctuations in the currency or capital markets, significant changes in the fiscal environment, or other one-off effects.
In life and health reinsurance, the technical result – including the result from reinsurance treaties recognised in the non-technical result owing to insufficient risk transfer – is expected to amount to at least €475m. In property-casualty reinsurance, Munich Re is aiming for a combined ratio of around 99% in 2018.
Overall, Munich Re expects interest rates to increase slightly in 2018, especially in the USA, 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 €7bn, representing a return on investments of about 3%.