German reinsurer Munich Re issued a profit warning today, saying turmoil in global markets would hurt its second-quarter profit and result in a lower than forecast profit for the year as a whole.
It cut its earnings forecast for the year after second-quarter profit declined 48 per cent. Net income fell to about €600 million ($942 million) from €1.16 billion a year earlier over the same period.
"Against the background of steep falls in share and bond prices, Munich Re expects its profit for 2008 to be below the previously envisaged range of €3 to €3.4 billion, but still well above €2 billion," the world's second-biggest reinsurer said in a statement.
"The main reason for this is the turmoil on the capital markets, which has led to an appreciable reduction in the group's investment result in the first half of 2008," it added.
Munich Re's shares fell sharply on the news and were trading 9.5 per cent lower at 14.14pm on the German DAX index.
Munich Re said its longer-term goals were unaffected by the profit warning. "This also applies to the medium-term target to increase earnings per share to more than €18 by 2010," it said.
Major stock markets have fallen sharply this year following the US subprime crisis, and volatility in both fixed-income and currency markets have risen.
"As an investor with assets of around €166 billion the Munich Re group has naturally been hit by these developments," the company said.
Agencies