Munich Re Raises Dividend as Quarterly Profit Falls
Nikolaus von Bomhard CEO of Munich Re
Guenter Schiffmann/Bloomberg
Nikolaus von Bomhard, chief executive officer of Munich Re.
Nikolaus von Bomhard, chief executive officer of Munich Re. Photographer: Guenter Schiffmann/Bloomberg
Munich Re, the world’s biggest reinsurer, plans to pay a higher dividend and said it will continue with share buybacks after fourth-quarter profit declined 38 percent.
Net income before minority interests in the three months through Dec. 31 dropped to 480 million euros ($663 million) from 780 million euros in the year-earlier period, the company said today in an e-mailed statement, citing preliminary figures. That missed the 521 million-euro median estimate of seven analysts surveyed by Bloomberg. The reinsurer proposed raising the dividend by 50 cents to 6.25 euros a share for 2010.
“The dividend increase is a positive surprise and again indicates the strong capital position as well as confidence in the earnings power,” Thorsten Wenzel, an analyst at DZ Bank AG in Frankfurt, wrote in a note to clients.
Munich Re, led by Chief Executive Officer Nikolaus von Bomhard, 54, is courting shareholders such as billionaire investor Warren Buffett with payouts as low interest rates and falling prices for coverage hurt earnings in the industry. The Munich-based firm, which plans to buy back as much as 1 billion euros of its own stock before the annual shareholder meeting in April, said today that it wants to purchase a further 500 million euros of the shares by the 2012 assembly.
‘Shareholder-Friendly’
“Share buybacks remain an important component of our shareholder-friendly, active capital management,” Chief Financial Officer Joerg Schneider said in the statement. By the end of January, the reinsurer had purchased 752 million euros of its stock under the current buyback program.
Munich Re shares rose 55 cents, or 0.5 percent, to 117.90 euros as of 9:22 a.m. in Frankfurt. The company, which is scheduled to report detailed fourth-quarter and full-year earnings on March 10, has gained 3.8 percent this year, valuing the company at about 22 billion euros.
Investment income declined to 1.4 billion euros in the fourth quarter from 2.1 billion euros a year earlier. Full-year profit of 2.43 billion euros reached the company’s forecast for about 2.4 billion euros in net income before minority interests. For 2011, Munich Re said it expects profit at “around the same level’ as in 2010.
Natural Catastrophes
Hannover Re, the world’s third-biggest reinsurer, on Feb. 2 confirmed its profit forecast for about 650 million euros this year after negotiating better-than-expected rates with clients in the January round of renewals, the most important date for renegotiations of property and casualty reinsurance contracts.
While the 2010 June-through-November Atlantic hurricane season didn’t result in costly insured losses, earthquakes in Haiti and Chile as well as winter storms in Europe led to an increase in natural disaster claims by more than two-thirds to $37 billion, exceeding the annual average of $35 billion over the preceding 10 years, Munich Re said last month.
The reinsurer’s biggest claim in 2010 was the earthquake that hit Chile in February. The New Zealand earthquake may cost Munich Re 340 million euros. It also expects claims of about 270 million euros from the December floods in Queensland, Australia. The floods that inundated Brisbane in January may cost ‘‘a similar amount,” the company said.
“Pressure on prices in most lines of business and regions is persisting,” Munich Re said, referring to the January round of renewals, where the company renews about two-thirds of its property and casualty reinsurance contracts. The company’s price level rose 0.1 percent, and Munich Re increased the volume of renewed business by 4.1 percent, it said. The reinsurer reported a 0.3 percent price decline a year earlier.
‘Markets Remain Challenging’
“The markets remain challenging,” said management board member Torsten Jeworrek, who heads Munich Re’s reinsurance business. “Capacity continues to be available in sufficient quantities in most lines and regions.”
Global prices for reinsurance coverage declined 7.5 percent for policies being renewed on Jan. 1 amid high levels of capital available in the industry, Guy Carpenter &Co., the reinsurance brokerage of Marsh & McLennan Cos. said in a December report.
Profit at Munich Re’s primary insurance unit, Ergo Versicherungsgruppe, more than doubled to 355 million euros in 2010 from 173 million euros a year earlier, the company said. That compared with target range of 350 million euros to 450 million euros, which Ergo set in its 2009 annual report.
To contact the reporter on this story: Oliver Suess in Munich at osuess@bloomberg.net
To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net; Edward Evans at eevans3@bloomberg.net
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