Shares in the Munich Re, the world’s biggest reinsurer, fall as much as 2.3 percent, leading European reinsurers lower as analysts highlight weakening pricing power and expected lower profitability this year and next.
JP Morgan analyst Michael Hutter predicts prices for natural catastrophe cover, which fell 11 percent when contracts with insurance companies were renewed at the start of the year, will see a series of declines this year.
Huttner is cutting his forecast net profit for Munich Re by 6 percent in 2014 and 2015, and reducing his rating on the stock to “neutral” from “overweight,” he says in a research note.
Worries over pricing and profitability are weighing on other reinsurers, with Swiss Re down 1.8 percent, Hannover Re down 1.1 percent and Scor down 2.2 percent. Munich Re shares trade 1.9 percent lower at 1027 GMT.
Credit rating agency Standard & Poor’s on Tuesday said “increasingly competitive behaviour” among reinsurers had replaced macroeconomic risks as the most prominent threat to the sector, and would weaken profitability in 2014 and 2015. S&P said it sees a negative trend in ratings in 2014.
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