German reinsurance giant Munich Re has revealed in its financial outlook that it is aiming to increase its profit for the current year by €200m to about €2.5bn.
Main building of Munich Re in Munich, Germany. (Credit: Munich Re / Marcus Buck, München)
Munich Re expects the bulk of the profit, at about €2.1bn to come from its reinsurance business, and nearly €400m to be made by its ERGO business, which offers customers expert advice and a variety of primary insurance products through its group of companies.
The company said that the good result in 2018 and the planned improvements in earnings power for the current year will enable it to propose an increased dividend of €9.25. Apart from that, the company also plans to initiate an additional share buy-back program with a volume of €1bn.
The company said that the two measures represent its sustainable and shareholder-friendly capital repatriation policy.
For the full year 2018, the German firm reported a profit of €2,275m in 2018, which was an increase by 392m, compared to the full year 2017. The operating result in 2018 was reported to be €3.72bn.
The reinsurer said that the expected technical result for life and health reinsurance for the year 2019 has been increased to nearly €500m due to positive developments in 2018. In property-casualty reinsurance, the company is targeting an improved combined ratio of nearly 98% in the current year.
As far as the ERGO Property-casualty Germany segment is concerned, the reinsurance giant expects an improved combined ratio of around 93%. It estimates the combined ratio in the ERGO International segment to be about 95%.
For 2019, Munich Re is estimating an investment result of nearly €6.5bn, which represents a return on investments of around 3%.
The company hopes to see its gross premiums written for 2019 to be roughly €49bn with the assumption that exchange rates remain stable. Out of this, it expects the reinsurance field of business to register gross premium of about €31bn and the ERGO business to contribute nearly €17.5bn of gross premium.
The reinsurer expects the premium income in the ERGO field of business to be close to €18.5bn in 2019.
Munich Re board of management chairman Joachim Wenning said: “Following the significant increase in profit last year, we anticipate that profits for 2019 and 2020 will continue to rise, reaching our medium-term profit guidance of €2.8bn in 2020. In reinsurance, we are pursuing our ambitious growth targets, and the successes of ERGO’s Strategy Programme are becoming clearly evident.
“At the same time, we are reducing complexity in our internal processes and resolutely driving forward digital transformation. Munich Re is on track.”
Last month, the reinsurance giant reported a decrease of 56% for its fourth quarter 2018 profit at €238m, compared to €538m for the same quarter of the year 2017.