* Rejects investor concern about Ergo's profitability
* Says group on track to meet 2017 targets
* Says price decline in reinsurance hasn't yet stopped
(Recasts, adds comments from incoming CEO)
MUNICH, April 26 The incoming chief executive of
German reinsurance giant Munich Re brushed off
investor concern about primary insurance unit Ergo's
profitability on Wednesday.
"Ergo is on a solid path," Joachim Wenning told shareholders
at Munich Re's annual general meeting, a day before taking the
helm as chief executive. "Ergo is on a path of modernisation and
Some investors have complained that Ergo has been a drag on
Munich Re's core reinsurance business.
Ergo posted a loss in 2016, but Munich Re estimates it will
generate a profit of between 150 and 200 million euros ($163 and
$218 million) this year.
Wenning reiterated that Ergo is expected to contribute 600
million euros to the company's profit from 2021.
Ergo unveiled a deep restructuring last June in a bid to
return to profit, cutting 13 percent of its German workforce and
setting out plans to launch a digital insurer and a revamped
Wenning, born in Israel and previously responsible for life
insurance and human resources at Munich Re, takes over as the
company faces a number of external headwinds and years of
falling profit, but hopes that its digital strategy will kick in
to produce growth and lift profit.
Munich Re said on Wednesday it was on track to reach its
profit target for 2017 despite low interest rates and falling
"A provisional estimate of business performance in the first
three months of the year indicates that we are well on track to
reach our profit target for 2017," outgoing Chief Executive
Nikolaus von Bomhard told shareholders at the meeting.
Munich Re is aiming for profit ranging between 2 and 2.4
billion euros this year, down from a profit of 2.6 billion euros
in 2016. It plans to publish its earnings for the first quarter
of 2017 on May 9.
Von Bomhard pointed to headwinds facing the company. For
one, "low interest rates are cutting ever more deeply into our
regular income from investments," he said.
He said the decline in prices in reinsurance had slowed but
"At the moment, profitable growth is not at a level that can
sufficiently compensate for falls in income," he said. "Against
this backdrop, the stated profit guidance is certainly
($1 = 0.9179 euros)
(Reporting by Tom Sims; Editing by Ludwig Burger and Adrian