Munich Re CEO Joachim Wenning told journalists at an informal meeting yesterday that the reinsurance firm aims to keep profits stable at EUR 2 billion or more, but that it is unlikely to return to levels seen in prior years.
For 2017 Munich Re is only forecasting a small profit, following the impacts of hurricanes and other major catastrophe events in recent quarters.
Before those catastrophes, the reinsurer had been forecasting a profit in the region of EUR 2 billion to EUR 2.4 billion and it seems that this is the level the company now anticipates going forwards, as market conditions are not expected to improve considerably.
Wenning told journalists that a profit of somewhere north of EUR 2 billion would likely be the target for the next few years, Reuters said as it attended the meeting.
Wenning said that low interest rates and also price pressure would continue to hold back growth and prevent Munich Re from returning its profits to levels seen in previous years.
Munich Re had reported profits of EUR 3.3 billion in 2013, EUR 3 billion in 2015 and EUR 2.6 billion in 2016, but returning to those levels may not be possible, even if rates increase due to the losses from recent hurricanes and catastrophes it seems.
“We won’t see big jumps back to previous earnings levels,” Reuters reported Wenning as saying, he added that any increase in profit was now expected to be gradual.
Wenning did say that rate rises, due to the recent losses, could help to speed up profit growth somewhat.
It’s a clear sign that the profitability of the reinsurance industry has diminished and will once again increase the pressure to reduce expenses and to digitalise or automate as many business processes as possible, in order to maximise margin and ultimately profits.
Munich Re has been taking steps to enhance efficiency for some time, adding new digital initiatives. But the core reinsurance business that used to drive its profits is no longer as profitable as it once was, which with market conditions expected to remain testing has led to this forecast for stable, but reduced profits.
