Munich Re hit by low capital returns, high flood claims | Business| Economy and finance news from a German perspective | DW | 06.08.2013
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Munich Re hit by low capital returns, high flood claims

The world’s biggest re-insurance company, Munich Re, has seen profits fall amid higher costs for the floods in Europe and flat yields in capital markets. The firm’s full-year profit target, however, is not at stake.

Munich Re's second-quarter net profit had sagged by about a third compared with the same period a year ago, coming in at 529 million euros ($701 million), the German reinsurer said Tuesday.

The earnings drop was primarily the result of natural disasters, the firm said in its earnings report, resulting in a 30-percent rise in claims to 605 million euros between April and June.

The heavy flooding in Central Europe this June alone had cost Munich Re 230 million euros in claims from insurance companies. Reinsurers like Munich Re provide backup coverage to primary insurers, enabling them to handle major losses.

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Munich Re's second-quarter profits were also hit by lower returns on the capital invested by the company. The company primarily invests in fixed-income securities such as bonds which currently yield rather low returns. Therefore, earnings from Munich Re's total investment volume of 230 billion euros was 14 percent lower than a year ago.

Chief Financial Officer Jörg Schneider described the current investment situation as challenging and beset with considerable risks.

Nevertheless, Munich Re's Chief Executive Nikolaus vom Bomhard maintained the firm's full-year targets, saying 2013 net profit would reach about 3 billion euros, down slightly from last year's 3.2 billion.

uhe / rg (Reuters, dpa)

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