Stable prices and conditions predicted by Munich Re in negotiations held with insurance companies for risk cover from Jan 2011 on
Board member Torsten Jeworrek promised the company would insist that prices correspond to risks in talks with insurers and said prices were rising for some business segments hit by losses following the sinking of an oil rig and an earthquake in Chile. “Growth without profitability is out of the question,” he said. He also said Munich Re does not need excess capital for organic growth and will mull merger chances if they arise.
“When you look at our excess capital, there is no significant need and demand to deploy it into organic growth, when you compare the possibilities in the market with the capital base we have in place,” Jeworrek said at a news conference at the annual meeting of the reinsurance industry in the Mediterranean resort of Monte Carlo.
“Whether there are then opportunities for mergers and takeovers, we will see. That is nothing I can comment on now,” said Jeworrek, who is responsible for Munich Re’s reinsurance business. Investors have been clamouring for reinsurers to return some of the cash pile they have built up in the post-crisis financial recovery to restore the lustre to valuations trading at around 85 percent of book. The world’s biggest reinsurer is buying back about 1 billion Euro ($1.3 billion) of its own shares in a programme to be completed by April 2011, but analysts say Munich Re may have 3 to 4 billion Euro of excess capital available.
But the company’s hands were tied more tightly than many investors realise, Jeworrek said, saying constraints on available capital were greater under German accounting rules than they appeared in the context of international IFRS standards. Munich Re has said in the past it was more likely to make acquisitions in primary insurance than reinsurance and it is targeting growth regions like emerging markets and East Asia.
In the wake of the Deepwater Horizon oil rig explosion in the Gulf of Mexico in April, Munich Re unveiled a new approach to insuring offshore drilling, which it said could create risk cover of up to $20 billion per drilling operation in the international insurance market. Munich Re itself would offer coverage capacity of around $2 billion, Jeworrek said, adding the group had not changed its estimated loss from the Deepwater sinking for a damage claim in the low, triple-digit million euro range.
