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Munich Re “poised” for growth as it targets reduced complexity

25th April 2018 - Author: Matt Sheehan

At Munich Re’s 2018 Annual General Meeting (AGM,) Joachim Wenning, Chair of the Board of Management, revealed that the company expects to increase its profits as it braces for growth by reducing operational complexity and embracing digital transformation.

Munich Re logo on a signWenning confirmed a profit guidance of €2.1–2.5 billion for 2018, which is higher than that of the previous year, as well as a medium-term profit guidance of €2.8 billion for 2020.

As part of the drive to reduce complexity, Wenning detailed plans to save €200 million per year by simplifying the structures and processes of the company, which includes cutting around 900 jobs worldwide through semi-retirement and redundancy packages, 480 of which will be in Munich.

Wenning commented: “Munich Re is again poised for growth. For the first time in five years, we are once again able to increase our profit guidance compared to the previous year. We will continue to pursue this positive result trend in future. By 2020, we intend to raise our result to around €2.8bn.

“Our business ambitions are considerable. Traditional reinsurance business has sustained growth potential, and the ERGO Strategy Programme is also progressing well. With their growth initiatives, reinsurance and ERGO will contribute in equal measure to increased profits in the coming years. Our strong balance sheet allows us to grow organically, and through acquisitions.”

On the company’s plans for digital transformation, Wenning said: “Munich Re is perceived by the market as an innovation leader, and rightly so. We use digital elements to strengthen our existing business and open up new business opportunities.

“We are developing new digital business models – such as for the Internet of Things. Munich Re is already a market leader in cyber insurance. Digital transformation will enable us to secure our earnings power for the future.”

Wenning’s comments reflect the content of his letter to shareholders last month, which outlined Munich Re’s plans to invest in digital transformation to enhance its core business model and push back boundaries.

At the 2018 AGM, shareholders also approved an unchanged dividend of €8.60 per share, which will amount to overall dividend payouts of around €1.3 billion.

With the approval of this payout, Munich Re has proven itself capable of providing sustainably high dividends despite severe catastrophe losses, like those experienced in 2017.

The AGM also authorised a share buy-back programme of up to €1 billion, which is to be completed by the 2019 AGM, and which follows the completion of a last year’s programme, which was also valued at €1 billion.

Accounting for dividend payouts and share buy-backs, Munich Re has returned just under €26 billion to its shareholders since 2005, equivalent to 85% of its current market capitalisation.

Additionally, Munich Re’s 2018 AGM elected Kurt Bock and Maximilian Zimmerer as new members of the Supervisory Board, and approved a new remuneration system for members of the Board of Management.

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