Saturday 13 April 2013

Analysis of Münchener Rückversicherung

A Germany re-insurance and insurance company

Company: Münchener Rückversicherung

Business: Re-insurance mainly as well as insurance with their Ergo part. As every insurance company they have float that they are investing into various companies.

Active: All over the world.

P/E: 8.6

Stock prices from closing day on 11/4-13

The P/E is extremely low being just below 9 but this does not come from that the stock is currently extremely cheap but it mainly comes from that 2012 was an excellent, excellent year for them. The book value now starts to be very close to the price of the stock and if we use the Graham formula we see that the stock is still definitely a buy even if one would recalculate a bit and "create" a normal earnings year. I find that their E/S is pretty low but I do not know this branch yet. The last five years they have had a 7% growth which I find excellent! This would according to Graham and Lynch justify a P/E of around 23 and we are far, far from that with our 9. They pay a very nice dividend 4.5% and this year that comes out as being 40% of their earnings. I find this very fair. If we look at the quarter earnings then we see that they especially in the final quarter 2012 had some extra expenses.

Conclusion: According to all the calculations even today this stock is still a buy and it has gone from around 109 € up to around 150 during the last year. I will consider buying more which will in that case negatively dilute my share price. But since they pay a high dividend I am sure that some people have bought the stock now during spring purely for that purpose. I therefore think that better buy opportunities will appear during late spring / summer when the dividend is out and people decide to try their fortunes elsewhere so I will wait until then.

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