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Munich Re eyes $3.17 billion net profit in 2012


FRANKFURT (Reuters)—Munich Re vowed to return to net profit of around €2.4 billion ($3.17 billion) this year after disaster claim payouts and financial market turmoil hammered its 2011 results.

The world's biggest reinsurer still beat expectations with net profit of €710 million ($938.5 million) in 2011, helped by favorable tax effects from the big damage claims last year, and said it expected to improve its underwriting performance this year.

"Overall, we want to achieve a profitability level that is similar to that of 2010," Chief Financial Officer Joerg Schneider told a conference call on Thursday.

Munich Re posted net profit of €2.4 billion in 2010 and analysts see it returning to that level this year, according to the average of 15 forecasts in a Reuters poll of banks and brokerages.

The company issued its standard caveats on the profit outlook, saying it depended on actual damage claims, currency and capital market movements remaining within expected bounds.

Munich Re got slammed last year when global insured losses from natural catastrophes rose to a record $105 billion.

Its shares have fallen nearly 12% from their year-earlier level in the wake of devastating earthquakes in Japan and New Zealand and tornadoes and hurricane in the United States. Rivals Swiss Re and Hannover Re have dropped by about 4 percent.

Despite the claims hit, Munich Re said it planned to keep its dividend for 2011 steady at €6.25 ($8.26) per share, helping to cheer investors who pushed the stock up 2%.

"The announced 2011 dividend ... and outlook to keep the dividend strategy stable is positive in our view," JP Morgan insurance analysts said in a note to clients.

The STOXX Europe 600 insurance index rose 0.9%.

The company said it was satisfied with the outcome of contract renewal talks at the start of the year with insurance company clients to provide reinsurance cover for 2012.

Munich Re's premium volume agreed in these talks rose by 2.6% and prices rose by around 2% compared with their year-earlier level. The company expects to see some further price rises in contract talks later this year.

CFO Schneider said the company was continuing to look at takeover targets but played down prospects of any major moves, saying Munich Re did not regret being outbid in recent auctions.

"Up to now, we have not seen a clear change to realistic pricing," he said of the merger and acquisition market.

"There's only a low probability that you'll see major steps from us," he added.

The 2011 net profit result, which is before deduction of minority interests, compares with the €590 million ($779.9 million) average in a Reuters poll of banks and brokerages.

Data from StarMine, which weights analyst forecasts according to their track record, showed Munich Re trading at 7.3 times 12-month forward earnings, a slight discount to Hannover Re, which trades at a multiple of 7.4, and Swiss Re, at 8.6.

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