Munich Expects '03 Loss
By Lisa S. Howard, Reinsurance Editor
NU Online News Service, Nov. 26, 3:45 p.m. EST?Coming on the heels of a successful 4 billion euro ($4.7 billion) rights offer, Munich Re announced it expects to post a post-tax loss for 2003, although a pre-tax profit is projected.
Munich Re said the its result for 2003 will be affected by "the non-deductibility of a large portion of the writedowns and losses on the disposal of shares." On the other hand, the group's earnings position will be improved by the good performance of the underwriting business.
The revelation was included in the company's third quarter results, when, it reported a net profit of 152 million euros ($179.2 million), compared to a loss of 859 million euros ($1.0 billion) during the same period in 2002.
During the third quarter of 2003, Munich Re reported gross premiums of 9.9 billion euros ($11.7 billion), compared with 9.2 billion euros ($10.9 billion) for the nine-month period in 2002.
The company's third quarter combined ratio for its non-life reinsurance group came to 99.3, compared with 114.1 for the same period last year. The combined ratio for its primary property-casualty insurance group came to 94.6 during the third quarter 2003, compared with 103.8 during the same period last year.
In its nine-month numbers, Munich Re reported a post-tax loss of 451 million euros ($531.6 million), compared with a group profit of 3.2 billion euros ($3.8 billion) for the nine-month period of 2003.
Explaining this result, Munich Re said a major part of the losses on equity investments currently are not deductible for tax purposes in Germany. As a result, Munich Re Group made "sufficient provision in the second quarter for a potential tax burden, whose exact amount for the life and health insurers in the group will depend on the outcome of the current German legislation process," the company said.
The tax provision, combined with the after-effects of the stock market slump in previous quarters attributed to the post-tax loss, the company said.
During the nine-month period, gross premiums came to 30.7 billion euros ($36.2 billion), compared with 29.6 billion euros ($34.9 billion) during the nine-month period of 2002.
The combined ratio for the nine-month period for its non-life reinsurance group came to 97.0, compared with 127.3 for the same period last year. The combined ratio for its primary property-casualty insurance group came to 96.3 during the third quarter 2003, compared with 102.1 during the same period last year.
"Underwriting profits and value appreciation in the investment portfolio increased shareholders' equity in the first nine months by 1.0 billion euros [$1.2 billion] to 14.9 billion euros [$17.6 billion]," compared to 13.9 billion euros ($16.4 billion) at year-end 2002, the company said.
Since then, the company conducted its right issue "to take better advantage of profitable business opportunities, especially in reinsurance," the company said.
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