Saturday 22 March 2014

Münchener Rückversicherung (MüRe) annual report 2013

MüRe, annual report, 2013, front cover

One of my few well behaving companies arrived with their annual report for 2013 and that was Münchener Rückversicherung. The market liked it but too me there was not really anything new besides from that they also mentioned that they are planning to buy back shares for around 1 billion euro.

If we take a look at the graph below see that the 2013 was actually a very bad year which has not at all been acknowledged by the stock market. The reason for this is that since the last three years that have had a decreasing number (compared to previous years but still increasing value) of written premiums. However last year the number of written premiums compares to 2012 was a negative value and that is really bad! My hope is that this comes from competitors writing bad premiums and that MüRe is protecting themselves by sticking to a certain level of safety which caused them to loose some customers last year but hopefully will protect them from losses in the coming year/years.

MüRe, 2013, Premiums, Result

It is also interesting to observe that how cyclical the result is based on especially the re-insurance part of their business. When big disasters happens they have a very poor result with usually a large drop in share price and secondly they then usually also have an excellent (in comparison ) year the year after the big disaster.

The table below contains the last five years and the data that they decided to highlight. What we can observe is unfortunately that the premiums have been more or less flat for the last three years which is not good. We also see that the book value has decreased during 2013 and that the amount of employees have also gone down which actually took place in the very final quarter so potential costs benefit will then hopefully come this year. They have managed to control the costs and the payments very nicely during the last two years or better put they had not re-insured any substantial things that happened during this period which have lead them to having excellent result in both 2012 as well as in 2013.

MüRe, Münchener Rückversicherung, 2013, key figures

So 2013 was in general an excellent year for MüRe but also for the shareholders of MüRe. We are being compensated for our investment with an increased dividend, an increased share price and a share buy-back program to the value of 1 billion.

Conclusion: It was indeed an excellent year for MüRe and it is also reflected in the share price. I see no reason to sell my shares but also no reason to increase my position. MüRe to me is on of those companies that one should keep forever and when they have a bad year due to a disaster and the share price is falling like a stone one should increase ones holding and in the meantime keep collecting the nice dividend.

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