Munich Re has reduced its earnings projections for this year after a poor first quarter confirmed the reinsurer’s concerns over the difficult business landscape.

Net profit for the three months to March 31 fell 44.8% to €436 million ($676.3 million) and gross written premium (GWP) dropped 4% to €12.5 billion ($19.4 billion).

The overall investment result fell to €1.57 billion ($2.4 billion) from €1.82 billion ($2.8 billion) in the corresponding period last year.

“The result for the first quarter is below our expectations… we had to cope with significant strains on our investment result,” CFO Jörg Schneider said. “The decrease in profits in the first quarter has dampened our optimism with regard to the annual result.”

The German reinsurer now expects a net profit of €2.3 billion ($3.6 billion), down from a previous estimate of €2.3-€2.8 billion ($4.3 billion).

It says its Ergo primary insurance unit – which made a first-quarter loss of €25 million ($38.8 billion) compared with a €102 million ($158.3 million) profit in the corresponding period last year – will require a costly turnaround program.

“It is looking more and more likely there will be high costs for implementing the strategy program at Ergo,” Mr Schneider said. “The amount is not yet definitive, but it is unlikely Ergo will post a positive annual result this year.”

Reinsurance operating income decreased 32.1% to €514 million ($797.6 million) and GWP fell 3.9% to €6.7 billion ($10.4 billion). The combined operating ratio for property and casualty reinsurance improved to 88.4% from 92.3%.