Munich Re posts record FY profit on favourable climatic environment UPDATE

Munich Re posts record FY profit on favourable climatic environment UPDATE

	Published : Wed, 28 Feb 2007 09:56 By : Agencies Print this Story

(Recasts, adds detail)

MUNICH (AFX) - Muenchener Rueckversicherungs AG said full year net profit rose to a record 3.536 bln eur from 2.751 bln, as the insurance industry was largely spared major losses from natural catastrophes in 2006, but said it expects profits to decline to 2.8-3.2 bln eur in 2007.

The company said it will propose a dividend of 4.50 eur/share for 2006 against 3.10 for 2005.

Analysts polled by AFX News had forecast net profit of 3.400 bln eur for 2006 and expected a lower dividend in the range of 3.10-4.05 eur a share.

In a very favourable environment, both reinsurance and primary insurance made a significant contribution of 2.7 bln eur to profits, the reinsurer said.

Munich Re said it does not expect 2007 to show an increase on the high profit level of 2006, especially as the burden from natural catastrophes is already well above the level at the end of February 2006, owing to winter storm Kyrill.

Munich Re said in the current year it expects a combined ratio of under 97 pct in reinsurance and of under 95 pct in its primary operations, while premium income is expected to remain flat at 37.5-38.5 bln eur.

Return on risk-adjusted capital is expected to amount to 15 pct or more after 20.3 pct last year.

'In the 2007 renewals still to come in Japan and South Korea, parts of the US market, Australia and Latin America, we will continue to systematically gear our underwriting policy to risk-adequate prices, terms and conditions,' chief executive Nikolaus von Bomhard said.

Profitability takes precedence over growth, both in re- and primary insurance, he added.

Net profit in the fourth quarter of last year declined 675 mln eur from 1.361 bln when it was boosted by a one-off gain from the sale of the reinsurer's stake in HVB. Additionally, the consolidated result in the primary insurance segment also saw a 32 pct drop to 489 mln eur.

The operating result dropped to 856 mln eur from 1.252 bln in the fourth quarter, but improved to 5.494 bln eur from 4.142 in the full year.

Full year gross premium income declined slightly to 37.436 bln eur from 38.199 bln, while net premiums dropped to 35.714 bln eur from 36.210 bln and slightly below the consensus of 36.055 bln.

The combined ratio for the reinsurance property/casualty operations improved to 92.6 pct compared with 111.7 pct the previous year, in line with analysts' forecast of 92.4 pct.

The combined ratio for the primary insurance operations was at 90.8 pct from 93.1 pct, better than the consensus of 92.6 pct.

A combined ratio above 100 pct means that an insurer paid out more in claims and expenses than it took in in premiums.

Munich Re's full year investment result declined to 8.876 bln eur from 10.818 bln and dropped to 1.883 bln eur from 2.766 bln in the fourth quarter.

Looking ahead, Munich Re said it sees good opportunities for profitable growth in the medium and long term for reinsurance.

'Altogether, demand for risk protection will increase further owing to concentration of values, technological developments and also climate change,' von Bomhard said, adding that he sees promising earnings opportunities in the US agricultural insurance.

In primary insurance, the focus is on expanding operations outside Germany -- particularly in selected eastern and southeastern European countries, as well as emerging markets like India, the reinsurer said.

judith.csaba@thomson.com

jcs/abr

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