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FRANKFURT (Reuters)—The world's biggest reinsurer, Munich Re, swung back to profit as expected in the first quarter, helped by rising investment income and damage claims far below those from devastating earthquakes in Japan and New Zealand a year earlier.
Net profit after minorities was €780 million ($1.02 billion), just ahead of the €776 million ($1.02 billion) average in a Reuters poll of banks and brokerages and a world away from the near €750 million ($981.3 million) loss in the first quarter of 2011.
"Despite the still difficult economic situation, we are optimistic for 2012 and are aiming for a profit for the year of around €2.5 billion ($3.23 billion)," Chief Financial Officer Joerg Schneider said in a statement on Tuesday.
Munich Re said major damage claims cost just €264 million ($345.4 million) in the first quarter, compared with around €3 billion ($3.93 billion) last year from the earthquakes in Japan and New Zealand and flooding in Australia.
Chief Executive Nikolaus von Bomhard said on April 26 that net profit would come to more than €750 million in the first quarter.
Munich Re shares have risen by nearly 14% from their year-earlier level but trail the gains at rivals Hannover Re , up 17%, and Swiss Re, up by nearly one quarter, both of which beat earnings expectations in the first quarter.
Data from StarMine, which weights analyst forecasts according to their track record, showed Munich Re trading at 7.2 times 12-month forward earnings, on a par with Hannover Re but at a discount to Swiss Re, which trades at a multiple of 8.7.
Munich Re said premium volumes decreased by about 3% in talks to renew reinsurance contracts in Japan, Korea and the United States from April 1. However, prices for renewed business rose by 5% from their year-earlier level, it said.
"We did reduce proportional earthquake covers in Japan in cases where we found the conditions inadequate," Torsten Jeworrek, Munich Re's board member responsible for reinsurance, said in the statement.
"But generally we were able to achieve distinctly improved prices and substantially better conditions in Japan," he added.
Munich Re said it expected to see rising prices for the contracts being renewed from July 1 in the United States, Australia and Latin America.
MUNICH—2011 was the costliest year on record for insured natural catastrophe losses, according to analysis by Munich Reinsurance Co.