Munich Re Net Income Drops 20%

Loss in investment income during the first quarter translated into a 20 percent drop in net income for Munich, Germany-based insurer Munich Re Group, but the company’s chief financial officer said the company remains on track to show targeted profit for the year.

The company reported net income of €785 million ($1.21 billion), off €189 million ($291 million) from the first quarter of last year. The sharpest earning drop came from investments that fell €1.5 billion ($2.3 billion) to €1.7 billion ($2.6 billion), a drop of 47 percent, Munich Re said.

The results also were negatively affected by a 2 percen t drop in gross premium written, which fell €176 million ($271 million) to €9.8 billion ($15 billion).

On the reinsurance side, Munich Re reported a combined ratio of 103.8, a 2 point increase from the same period a year ago. Reinsurance property-casualty gross premium written was down 5 percent, or €215 million ($331 million), to €3.8 billion ($5.9 million).

Reinsurance was affe cted by “a random cluster of major losses,” the company said, with the worst occurring in two coal mines in Queensland , Australia , in January and February. Claims costs from those events are expected to reach nearly €200 million ($308 million) combined. Winter storm Emma in Europe accounted for €75 million ($116 million). Total losses were pegged at €578 million ($890 million).

The company’s primary insurance operations reported a 13.1 point improvement in the quarter to 89. Property-casualty gross premium written rose €43 million ($66 million) to €1.95 billion ($3 billion).

“Despite the greatly increased volatility of the capital markets and the growing pressure on prices in reinsurance, we aim to achieve a profit of [ €3 billion-€3.4 billion ($4.6 billion-$5.2 billion)] in 2008,” Jörg Schneider, Munich Re’s chief financial officer , said in a statement.