The world’s largest reinsurer, Munich Re, reported an almost 5 percent drop in net profit in the first quarter, as a strong euro dragged down premium income.
“Despite negative currency effects, we almost matched the outstanding result of the first quarter last year,” Chief Financial Officer Joerg Schneider said in a statement on Thursday.
Group gross written premiums fell 2.7 percent to €12.9 billion ($17.97 billion), the company said.
A Munich Re spokeswoman said euro strength primarily against the U.S., Canadian and Australian dollars in the first three months had undermined reinsurance premiums, which would have risen by 4.5 percent if the exchange rates had remained stable.
Euro strength is now expected to cut about €2 billion [$2.786 billion] off gross premiums in 2014, bringing them to about €48 billion [$66.86 billion].
Munich Re and peers such as Swiss Re and Hannover Re are also battling fierce competition from alternative capital investors such as pension funds, which are helping to drive down prices in the reinsurance market.
Munich Re said prices fell by about 8 percent when its portfolio of contracts with insurance companies in Japan and North America were renewed in April, although it said it had managed to achieve higher profitability than it had expected.
Quarterly net profit after minorities fell to €919 million [$1.28 billion] – benefiting from lower taxes – from €963 million [$1.34 billion] a year earlier, Munich Re said. “We were largely spared major losses,” CFO Schneider said in the statement.
“The first quarter results were slightly below expectations,” said Equinet Bank analyst Philipp Haessler in a note to clients.
“The April renewals were slightly down which is no surprise given the soft market environment,” he said, adding that he was maintaining his “hold” recommendation on the stock.
The reinsurer reiterated its target of earning net profit of €3 billion [$4.18 billion] in the full year.
Munich Re’s shares were down 1.5 percent to €156.70 [$139.30] at 0717 GMT, lagging a 0.4 percent decline in the STOXX Europe 600 insurance index.
(Reporting by Jonathan Gould; Editing by Thomas Atkins and Mark Potter)