Munich Re smashed analysts’ already high expectations to announce a net profit of €3.2bn (£2.74bn) for 2012, up from €712m for the year before.
Reinsurers help spread the risk of primary insurers and their profitability relies heavily on the absence of major natural disasters. Munich Re enjoyed a successful year in this respect, easily absorbing the €800m cost of Superstorm Sandy. Total catastrophe losses for the full year were only €1.3bn.
In response to this – and a healthy rise in investment income – the company hiked its year-end dividend by 12 per cent to €7 a share.
However analysts are concerned that the company now offers limited growth potential. Munich Re admitted the volume of its property-casualty business dropped when it renewed key contracts at the start of this year, partially offset by a small price rise.
“January renewals offer more of a reality check on the challenges ahead for Munich Re and the sector in terms of an ‘unrelenting competitive environment’ on underwriting,” said Joy Ferneyhough at Espirito Santo.
She also suggested that stable earnings forecasts support the view that “Munich has become almost a utility stock”.
The company’s shares closed up 3.89 per cent at €138.95 in Germany yesterday.