Fair weather for Munich Re as profits rise

A RELATIVELY calm hurricane season in America has helped to push up profits at Munich Re, despite massive payouts for the Chilean earthquake and the Deepwater Horizon disaster.

The insurer said that its net profits for the first three quarters of 2010 were 19 per cent higher than for the same period last year at €764m (£660.3m), up from €643m. It now predicts that its profits for the full year will be in the region of €2.4bn, slightly down on the €2.56bn it made in 2009. The previous estimate for 2010 was €2bn, a number that has already almost been reached.

In the first nine months Munich Re paid out €523m for man-made losses including a figure in the low hundred millions of euros for the Deepwater Horizon spill. This is added to €1.1bn for natural disasters, a figure that was almost three times bigger than the €300m paid out the year before. The biggest loss-event so far this year was the Chilean earthquake, which cost the insurer €1bn. Claims for the hurricane season have so far been low.

Despite the positive news, Munich Re remained cautious for 2011. It does not expect capital market interest rates to rise significantly so regular income from fixed-interest securities and loans is likely to be lower. The group expects a return of under four per cent on its portfolio next year.

The good results will be cheered by Warren Buffett, who is the largest shareholder in Munich Re with a holding of around 10 per cent.