July 12 (Bloomberg) -- German stocks dropped for the first day in three. Munich Re paced the decline after JPMorgan Chase & Co. cut a recommendation on European reinsurance stocks.

The benchmark DAX index slipped 10.35, or 0.2 percent, to 4653.03 after yesterday reaching a three-year closing high. Twenty stocks dropped on the 30-member index. DAX September futures added less than 0.1 percent to 4671 as of 6:12 p.m. in Frankfurt. The HDAX Index of the country's 110 biggest companies fell 0.2 percent to 2402.92.

Munich Re, the world's largest reinsurance company, fell 63 cents, or 0.7 percent, to 88.35 euros. JPMorgan Chase & Co. cut its recommendation on European reinsurance stocks to ``underweight'' relative to the broader industry.

``Our optimism that discipline would remain in the reinsurance market increasingly looks to be a false hope,'' analysts at JPMorgan wrote.

Allianz AG slipped 1.16 euros, or 1.2 percent, to 98.15 euros as Munich Re sold as much as 1.1 billion euros ($1.3 billion) of the insurer's shares.

Goldman Sachs Group Inc. is offering investors 11.4 million shares of Munich-based Allianz, Europe's biggest insurer, for 98.80 euros to 99.25 euros apiece, said people familiar with the matter who declined to be identified.

``We have sold 11.4 million of Allianz shares we previously owned,'' Munich Re spokesman Rainer Kueppers said, declining to elaborate. The sale cuts the company's stake in Allianz to ``slightly below 5 percent.''

Hannover Re, the world's No. 5 reinsurer, dropped 39 cents, or 1.2 percent, to 30.96 euros.

Volkswagen AG, Europe's largest carmaker, advanced 2.1 percent to 40.85 euros. Volkswagen said first-half sales of its commercial vehicles rose 32 percent, helped by rising demand for the Caddy model. Caddy sales more than doubled to 56,000 units from 22,000 vehicles a year earlier, the company said.

The following stocks made gains or losses in Frankfurt. Symbols are in parentheses after the companies' names:

Depfa Bank PLC (DEP GY), Europe's second-largest provider of public finance, fell 26 cents, or 1.9 percent, to 13.75 euros. Alexander Hendricks, an analyst at Deutsche Bank AG, cut Depfa's share recommendation to ``hold'' from ``buy.''

Epcos AG (EPC GY), the maker of electronic components, rose 1 cent, or 0.1 percent, to 10.52 euros. Analysts at WestLB AG raised Epcos's share recommendation to ``outperform'' from ``neutral.''

IDS Scheer AG (IDS GY), a software consultant, fell 30 cents, or 1.8 percent, to 16.70 euros. Knut Woller, an analyst at HVB Group, cut IDS's share recommendation to ``neutral'' from ``outperform.''

Heidelberger Druckmaschinen AG (HDD GY), the world's largest maker of printing machines, fell 45 cents, or 1.7 percent, to 26.65 euros. The Heidelberg-based company had its stock rated ``underweight'' in new coverage at Morgan Stanley.

To contact the reporters on this story: Alexis Xydias in London at axydias@bloomberg.net; Chris Fournier in Frankfurt at Cfournier3@bloomberg.net

Last Updated: July 12, 2005 12:21 EDT