UPDATE 3-Natural disaster claims soar at Munich Re

* Net income down 5 pct at 2.43 bln euros, forecast 2.47 bln

* Raises dividend more than expected to 6.25 euros

* 2010 reinsurance combined ratio 100.5% vs forecast 100%

* Q4, Q1 Australia flood claims each about 270 mln euros

* Shares up 0.1 percent vs 0.7 pct drop in insurance index

(Adds board member comments, background, updates shares)

By Jonathan Gould

FRANKFURT, Feb 3 (Reuters) - Earthquakes, storms and floods sent claims soaring and dented profits at Munich Re (MUVGn.DE) last year but the world's biggest reinsurer said it could manage to maintain earnings at a high level, boosting its share price.

In a sign it was expecting less earnings volatility ahead, Munich Re said on Thursday it would bump up its dividend and buy back more of its shares, adding that net profit this year should match the 2.4 billion euros ($3.4 billion) it made in 2010.

"Despite weighty major losses, which also affected us at the end of the year, we are presenting a good result," Chief Financial Officer Joerg Schneider said of the group, which also operates primary insurance and health insurance businesses.

The hit from catastrophe claims last year jumped to 1.6 billion euros from just 200 million euros a year earlier.

Flooding in Australia cost the company 270 million euros in the fourth quarter, and Munich Re said it expected a hit of similar size from those floods in the first quarter as well.

These figures were "quite high", said Equinet analyst Philip Haessler.

Torsten Jeworrek, Munich Re's chief executive for its Reinsurance division, told reporters he was unable to estimate the cost from Cyclone Yasi, but that it was in an area with relatively low insured values.

The powerful super-cyclone, roughly the size of Italy, swept through Australia's northeast coast overnight. [ID:nL3E7D21FW]

DIVIDEND HIKE

Munich Re said it would raise its dividend for 2010 by 50 cents to 6.25 euros per share, above the 6.03 euros expected in a Reuters poll of analysts, while also buying back 500 million euros ($692 million) worth of its own shares by April, 2012.

"The dividend increase to 6.25 euros is a positive surprise in our view and again indicates the strong capital position, as well as confidence in the earnings power," said DZ Bank analyst Thorsten Wenzel in a note to clients.

Munich Re's shares were up 0.1 percent at 117.5 euros by 1150 GMT, outpacing a 0.7 percent fall in the Stoxx Europe 600 insurance index .SXIP.

Wenzel said Munich Re also did better than expected in renewing reinsurance contracts with insurance company clients at the start of the year.

Reinsurance companies like Munich, Swiss Re RUKN.VX and Hannover Re (HNRGn.DE) have been battling a cyclical downslide in prices, as the supply of reinsurance cover on offer to insurers outstrips demand.

Reinsurers provide financial backing to insurance companies for big claims such as earthquakes and hurricane damage.

The price slide looked set to continue, said Jeworrek in the group's results statement on Thursday.

"The markets remain challenging," Jeworrek said. "Overall, pressure on prices in most lines of business and regions is persisting," the company said.

In renewing reinsurance contracts as of Jan. 1, Munich Re said it managed to raise premium volumes by 4.1 percent to 8.2 billion euros and prices by 0.1 percent compared with the previous year.

Rival Hannover Re (HNRGn.DE) said on Wednesday it had managed to keep its prices broadly stable and boost premium volumes by about 2 percent in the January contract renewals. [ID:nLDE7102GQ]

For the full year 2010, Munich Re posted net profit of 2.43 billion euros, slightly short of the 2.47 billion euros average expectation in a Reuters poll of banks and brokerages. [ID:nLDE7100F2] ($1=0.7224 euros) (Editing by Greg Mahlich)