Sunday 10 August 2014

Münchener Rückversicherung report Q2 2014

MüRe, Q2, 2014, report, front page

MüRe dropped well over -2% on the release of their Q2 report and as always the reason was that they were behind the expectations of the analyst. Was the report that bad?

No, is my direct answer and I fully accept that MüRe does not lower their criteria even though it means lost contracts. In the long run it will be beneficial but, of course, in the short run it looks bad with decreased premiums written. For my previous report please see Münchener Rückversicherung (MüRe) report Q1 2014 and for the full Q2 report by MüRe please click on this link.

Below we have the key figures and their things looks very fine with a 12% increase in earnings and over 16% increase per share due to for instance their share buy-back program. It is also nice to see that the book value per share has increased even though it follows the same trend coming from the share buy-back program. The management has been buying plenty of shares according to the German inside trading: June 2014 as well as German inside trading: July 2014. I guess they are less happy now with the latest drop of DAX and of MüRe in particular.

MüRe, 2014, Q2, key figures

Further back we find the income statement and here we see what is part of the reason for the analyst concern which I consider to be two-fold. One is that MüRe did not reach their expected earnings and secondly is due to that they write less premiums. They are down a full -5% with the premiums. The major reason for why they have managed to balance that out is by having a very good investment result and the question is what will happen with that now that the market is dropping a little... the minor reason was due to decreased costs.

MüRe, income statement, Q2, 2014

When I was in my summer house I talked to my brother about MüRe and he then said that they are only one disaster away from a drop in share price. And it is indeed true, with big accidents the reinsurance companies will always drop in value. To me that means that it is then once again the good moment to push in more capital in the company. I intend to use MüRe as a high interest paying bank account and now I am waiting for the next disaster before I make the next investment.

Conclusion: Until that big disaster hits, MüRe will be doing well and make money. Sure the competitors will grab some market shares which will decrease the revenue slightly but nothing even remotely close to what a big disaster would do and then most likely those competitors will be hit even worse but that is pure speculation by me. I will of course keep my shares. To get to know MüRe a little better please click on analysis of MüRe 2014.


Anonymous said...

I bought MURE on friday. I think it is a good investment

Fredrik von Oberhausen said...

In the long run i am almost certain that it will become a great investment for you. Short term... Who knows? Another fukushima and the share price will drop like a stone... But then you will get the chance to buy even more.