Revised forecast due to capital market turmoil, more writedowns possible
Munich Re said it expects profits for 2008 to be below the previously predicted range of €3 to 3.4bn ($4.7 to 5.3bn).
The main reason it gave for this was the turmoil in capital markets, which has led to a reduction in the Group’s investment result in the first half of 2008.
Substantial write-downs have had to be made and net gains on disposals have remained well below the previous year’s figure.
The Group said further writedowns of equities could be necessary over the rest of the year.
On the basis of the provisional figures, the Group expected its second quarter profit to total around €600m compared with € 1,158m for the same period last year, and about €1.4bn (2.1bn) for the first half-year.
“As one of the most significant investors in our industry, we cannot escape the current capital-market turmoil.
CFO Jorg Schneider
Since the beginning of 2008, the share price has fallen substantially, with the EUROSTOXX50 and the DAX showing changes of between –20% and –24% up to 30 June 2008. Munich Re has been hit by these developments.
The Group’s economic exposure to equities amounts to just under 7% of its overall assets.
Merrill Lynch downgraded the reinsurer to neutral from buy.
CFO Jörg Schneider commented: "As one of the most significant investors in our industry, we cannot escape the current capital-market turmoil.’
The share buy-back programme would continue, in line with previous announcements, said the Group.