Munich Re Group: Lower profit in 2nd quarter of 2008 due to capital market turmoil; more cautious profit forecast for the financial year 2008 as a whole; medium-term target for the period up to 2010 confirmed

Against the background of steep falls in share and bond prices, Munich Re expects its profit for 2008 to be below the previously envisaged range of €3.0–3.4bn, but still well above €2bn. The main reason for this is the turmoil on the capital markets, which has led to an appreciable reduction in the Group’s investment result in the first half of 2008.

On the basis of very provisional key figures, the Group expects its consolidated profit to total around €600m (same period last year: € 1,158m) for the second quarter and about €1.4bn (2.1bn) for the first half-year. Group equity as at 30 June 2008 will probably be in the range of €21.5bn (compared with €23.8bn as at 31.3.2008).

Since the beginning of 2008, share prices have fallen substantially, with the EUROSTOXX50 and the DAX showing changes of between -20% and -24% up to 30.06.08. Fixed-interest securities and currency parities have also been subject to exceptionally high volatility. As an investor with assets of around €166bn, the Munich Re Group has naturally been hit by these developments. Within the framework of its prudent and risk-conscious investment policy, the Group’s economic exposure to equities only amounts to just under 7% of its overall assets. Nevertheless, substantial write-downs have had to be made for this equity portfolio and net gains on disposals have remained well below the previous year’s figure. Write-downs of fixed-interest securities were only small in scope, with the Group again benefiting from its proven policy of restraint with regard to higher-risk investments in this category. If price levels stay the same, further write-downs of equities would be necessary over the rest of the year. This will not apply if, as some market players expect, a significant price recovery takes place.

Munich Re’s longer-term goals remain unaffected by this reassessment. This also applies to the medium-term target to increase earnings per share to more than €18 by 2010.

As planned, Munich Re’s figures for the first half-year 2008 and the outlook for the whole of 2008 will be published on 6 August 2008. All statements made today are, as always, conditional on normal claims and capital-market developments.