By ULRIKE DAUER
FEBRUARY 2, 2010, 12:06 P.M. ET
Germany’s Munich Re AG, one of the largest reinsurers world-wide, said fourth-quarter earnings rose sharply because of lower claims for natural disasters, and said it would increase its dividend for 2009.
“This is another good result that demonstrates Munich Re’s earnings strength,” Chief Financial Officer Jörg Schneider said Tuesday. “We are realistic in our expectations and remain dependable for investors.”
Preliminary net profit including minorities, which Munich Re considers its key earnings figure, was about €780 million ($1.09 billion) in the period, up from about €110 million a year earlier, beating an average analyst forecast of €604 million. Fourth-quarter gross premium income—a measure or revenue—rose 7.2% to €10.4 billion from €9.7 billion.
Uwe Lein/Associated Press
Jörg Schneider, CFO of Munich Re, is seen during an interview in Munich in September 2009.
The company said it plans to pay a dividend of €5.75 a share for 2009, up from €5.50 for 2008. Munich Re has completed half of the €1 billion buyback of its own shares it planned by the 2010 annual general meeting, Mr. Schneider said, adding that the company saw room for another, more-limited share-buyback program.
Munich Re didn’t release all of its fourth-quarter figures. The Munich-based reinsurer will present full fourth-quarter and 2009 earnings on March 10.
Munich Re gave no concrete full-year outlook, saying it will “continue to place high emphasis on reliability and predictability on the basis” of low volatility in its earnings. It said, however, that it expects a smaller return on investment this year than in 2009 due to low interest rates and because last year’s figure was lifted by disposal gains.
Munich Re’s fourth-quarter investment result rose to €2.1 billion from €1.9 billion in the year-earlier period. For the full year, the return on investment was 4.3%, helped by substantial disposal gains and lower write-downs, Munich Re said.
Reflecting the “exceptionally low claims costs for natural catastrophes,” the company’s combined ratio fell to 90% in the quarter from 93.8% a year ago. The combined ratio compares an insurer’s claims costs and revenues. A figure below 100% means its underwriting business, stripping off the investment result, was profitable.
Munich Re said its capital is solid and that a drop in shareholder equity in the fourth quarter was due to a combination of share buybacks, the acquisition of shares in primary insurer Ergo Versicherungsgruppe AG and lower realized gains on fixed-income securities in its portfolio.
Munich Re holds more than 95% of Ergo and is in the process of squeezing out remaining shareholders. Ergo contributed an after-tax profit of €173 million to 2009 earnings, of which €100 million was in the fourth quarter.
Last week, Munich Re said billionaire investor Warren Buffett owned financial instruments that could make him the company’s biggest shareholder next month. As of Jan. 22, Mr. Buffett held financial instruments that could lift his voting rights in the company to 5.224%, if exercised on March 11.
“We don’t consider [Mr.] Buffett a competitor” and “don’t consider his investment a hostile investment,” said Mr. Schneider Munich Re’s CFO, pointing out that Mr. Buffett’s Berkshire Hathaway Inc. also has reinsurance business, but with a different business model.
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