Catastrophe losses hit Munich Re results

(Reuters) — German reinsurer Munich Re reported net profit for 2016 below expectations on Tuesday after large losses from natural catastrophes in the fourth quarter, sending its shares to the bottom of Germany's DAX index.

The world’s largest reinsurer held out the prospect of a further share buyback, however, continuing a trend of recent years as reinsurers struggle to put money to work against a backdrop of declining prices.

“We still have wiggle room for another share buyback on top of the dividend,” Chief Financial Officer Joerg Schneider told a media call, adding a decision would be made by March.

Munich Re launched share buyback programs totaling €1 billion ($1.07 billion) in 2015 and 2016.

Mr. Schneider said its insurance arm Ergo could expand outside Germany through acquisitions, but that Munich Re was not looking to make any large purchases.

Competition in insurance and reinsurance and a few large mergers in recent years have fueled speculation of further deals.

Preliminary net profit for 2016 was around €2.6 billion ($2.8 billion), down 16% from a year earlier and below the consensus for €2.7 billion ($2.89 billion) in a company-compiled forecast.

But Munich Re said it had met its profit target of “well over €2.3 billion ($2.46).”

Mr. Schneider said 2017 profit may be a little lower than 2016.

Major claims from natural catastrophes were high in the fourth quarter, with costs of €232 million ($248.2 million) for Hurricane Matthew, which hit the United States and Caribbean and €251 million ($268.5 million) for an earthquake in New Zealand.

Munich Re and rivals such as Swiss Re and Hannover Re have been battling several years of falling reinsurance prices, along with low interest rates, which cut the value of their investments.

Hannover Re on Tuesday reported a net profit of €1.17 billion ($1.25 billion) for 2016, beating its own target.

The January renewals season for reinsurance was “once again challenging.” Torsten Jeworrek, a member of Munich Re’s board of management, said in a statement, although he added that price reductions had continued to slow.