Munich Re ups dividend after 2010 undershoots

FRANKFURT (Reuters) - Munich Re (MUVGn.DE), the world's biggest reinsurer, will bump up its dividend and buy back more of its shares, pleasing investors after the company's 2010 net profit landed just shy of the average forecast.

Munich Re said it would raise its dividend for 2010 by 50 cents to 6.25 euros per share, well 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.

The news helped boost Munich Re's share by 0.5 percent by 0818 GMT, outpacing a flat Stoxx Europe 600 insurance index.

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 for the risk cover they offer to reinsurers, after damage claims in recent years were not big enough to enable reinsurers to raise prices.

That trend looked set to continue, said Torsten Jeworrek, Munich Re's board member responsible for reinsurance, in a 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 January 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.

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.

The hit from natural catastrophe damage claims such as earthquakes and storms last year rose 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.

(Editing by Will Waterman)

($1=.7224 Euro)