Munich Re Gains Most in 6 Months as Dividend Rises

Munich Re, the world’s biggest reinsurer, headed for the biggest increase in six months after saying it will pay 12 percent more in dividends and fourth-quarter profit beat analysts’ forecasts.

Munich Re proposed raising the dividend for last year to 7 euros a share from 6.25 euros in 2011, the Munich-based company said in an e-mailed statement today. Net income after minority interests fell to about 480 million euros ($646 million) from 627 million euros a year earlier, according to preliminary earnings. That exceeded the 448.3 million-euro average estimate of 10 analysts surveyed by Bloomberg.

“Our core business in insurance and reinsurance is healthy, while the claims burden from major losses was slightly below average,” Chief Financial Officer Joerg Schneider said in the statement. “We also achieved a good investment result.”

Munich Re rose 2.1 percent to 136.90 euros at 11:37 a.m. in Frankfurt, heading for the biggest advance since Aug. 3. The shares have climbed 29 percent over the past year, beating gains of 15 percent for the Stoxx 600 Insurance Index and valuing the company at 24.6 billion euros.

Reinsurers, who help insurers such as Allianz SE and AXA SA shoulder risks, benefited from decreasing disaster claims, growing life reinsurance premiums and a recovery in capital markets last year, offsetting negative effects from low interest rates.

‘Disciplined Approach’

Full-year profit more than tripled to 3.2 billion euros from 702 million euros in 2011 as investment income increased and amid “stable” prices and conditions, Munich Re said.

“Munich Re continues to adhere to its disciplined underwriting approach,” Frank Kopfinger, a Frankfurt-based analyst with Credit Agricole Cheuvreux SA who recommends buying the shares, wrote in an e-mailed report to clients. “This will certainly hurt its top-line performance, but we expect this to at least maintain the high profitability levels in its underwriting business.”

Fourth-quarter investment income climbed to 2.2 billion euros from 1.9 billion euros in the year-ago period. Investment income in the year as a whole increased to 8.4 billion euros from 6.8 billion euros.

Munich Re said it renewed more than half of its non-life reinsurance business, or a premium volume of about 9.2 billion euros in January.

“The price level, which gives an indication of the potential profitability of the business, rose marginally by 0.5 percent,” it said. The reinsurer said it expects the trend toward “mainly stable prices” to continue unless large losses occur.

Hurricane Sandy

Natural catastrophes caused $65 billion in global insured losses in 2012, down from $119 billion in the previous year. Hurricane Sandy, which swept across the U.S. Northeast in October, will account for $25 billion in total losses, making it the single most expensive natural catastrophe and costing Munich Re about 800 million euros before tax, the company said.

Gross premiums written at the property and casualty reinsurance unit, Munich Re’s biggest in terms of premiums, rose 8.5 percent to 7 billion euros in the fourth quarter from a year ago, according to the statement. The ratio of claims and costs to premium income fell to 83 percent from 102 percent. A ratio above 100 percent shows a loss from underwriting.

Munich Health, the reinsurer’s smallest unit, had a loss of 160 million euros in the fourth quarter, partly on writedowns on its U.S. Medicare business at Atlanta-based health insurer Windsor Health Group Inc.

“Given the difficult situation at WHG, however, a further loss for Munich Health in 2013 cannot currently be ruled out, although this would most likely be considerably smaller,” the company said.

Munich Re is scheduled to report final full-year earnings data on March 13.

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