Munich Re Raises Dividend as Profit Beats Estimates

Feb 04, 2014 4:18 am ET

(Updates with shares in fourth paragraph).

Feb. 4 (Bloomberg) -- Munich Re, the world’s biggest reinsurer, plans to boost its dividend after fourth-quarter profit beat estimates on lower catastrophe-related costs.

Net income rose to about 1.2 billion euros ($1.6 billion) from 477 million euros reported a year before, the Munich-based company said in a statement today, citing “provisional calculations.” Profit exceeded the 954 million-euro average estimate of 11 analysts surveyed by Bloomberg.

“The very good result, to which all the business fields contributed, demonstrates Munich Re’s earnings strength,” Chief Financial Officer Joerg Schneider said in the statement. “We have clearly surpassed our profit guidance.”

The reinsurer proposed raising the dividend for 2013 to 7.25 euros a share from 7 euros, matching the Bloomberg Dividend Forecast. The stock advanced 0.8 percent to 154.35 euros by 10:17 a.m. in Frankfurt trading, trimming the decline this year to 3.6 percent.

Munich Re, led by Chief Executive Officer Nikolaus von Bomhard, 57, announced plans last year to buy back 1 billion euros of stock by a shareholders’ meeting scheduled for April 30. Reinsurers, which help primary insurers shoulder risks, are increasing payouts to investors as strong balance sheets and lower-than-average losses from natural disasters have resulted in an abundance of capital available for coverage.

Falling Prices

The reinsurance industry had about $322 billion in dedicated capital at the end of 2013, almost a record, according to Guy Carpenter, the reinsurance broker of Marsh & McLennan Cos. Because of the supply, rates for property-catastrophe policies up for renewal on Jan. 1 declined 11 percent, while prices also fell for most other types of coverage, according to the broker. Prices fell in seven of the last 10 years, according to the Guy Carpenter World Property Catastrophe Rate on Line Index.

In January, when Munich Re renewed “slightly more than half” of its non-life reinsurance contracts, or about 8.7 billion euros in premiums, the company increased the volume of renewed business by 2.7 percent, with prices falling by about 1.5 percent at “largely stable” terms and conditions. “Price competition has increased in the traditional reinsurance market,” the company said.

Insurers’ and reinsurers’ claims from natural catastrophes fell 52 percent last year to about $31 billion amid a quieter hurricane season, Munich Re said on Jan. 7. Claims from hailstorms and floods in Germany topped the list of last year’s most costly insurance losses at about 7 billion euros.

Topping Estimates

The Atlantic hurricane season, which runs from June through November and can result in the industry’s biggest losses, was one of the quietest in the last 20 years in 2013, with the fewest hurricanes since 1982, according to reinsurance broker Willis Re.

Munich Re’s full-year profit rose to 3.3 billion euros from 3.2 billion euros. Earnings exceeded the company’s target of 3 billion euros, which Munich Re increased in November from an earlier goal of getting “close to” that amount. Analysts’ average full-year profit estimate was 3.06 billion euros.

For the full year, currency translation effects had a negative impact of 300 million euros while income taxes declined to 100 million euros from 900 million euros a year earlier. Investment income fell to 7.7 billion euros from 8.4 billion euros, representing a return of 3.5 percent.

--Editors: Frank Connelly, Mark Bentley