UPDATE 2-Munich Re raises prospect of share buyback

Tue Mar 12, 2013 8:50am EDT

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By Alexander Hübner and Jörn Poltz

MUNICH, March 12 (Reuters) - Munich Re on Tuesday raised the prospect of buying back its own shares, saying it had achieved a degree of profitability that was hard to plough back into the business.

The world's biggest reinsurer said it aimed to earn close to 3 billion euros ($4 billion) this year, after unusually low damage claims and strong investment gains helped it beat expectations in 2012.

"We are hardly able to put to work the kind of capital that we are generating at the this level of profitability," Chief Executive Nikolaus von Bomhard told a news conference.

"That's why the dividend is not a burden and the question of share buybacks will certainly be asked in the course of time," he added.

Von Bomhard left open the timing of a decision to buy back shares, however, saying low capital market interest rates and uncertainties over insurance regulation were reasons for caution.

Munich Re was also likely to refrain from takeovers to expand its book of business, as only one in four acquisitions tended to work, von Bomhard said.

"We don't want to buy growth," he said.

Munich's 2013 net profit goal is slightly down from the 3.2 billion euros it earned in 2012, but that result was favoured by lower-than-expected payouts for big damage claims and a one fourth rise in the income from investments.

Analysts on average expect Munich Re to post net profit of 2.8 billion euros this year, according to Thomson Reuters data.

"We believe the outlook from Munich Re is somewhat on the conservative side," said DZ Bank analyst Thorsten Wenzel in a note, adding that consensus estimates were likely to rise.

Munich Re's shares rose 0.8 percent by 1204 GMT, outpacing a 0.5 percent rise in the STOXX Europe 600 insurance index and a slightly negative index of German blue chip companies .

The reinsurance business contributed more than 3 billion euros of 2012's net profit, with primary insurance kicking in 247 million euros and the health business posting a loss of 92 million.

Munich Re said it could not rule out a further loss in the health business in 2013, as the unit struggles with problems in the U.S. market. It added it would not renew the contract of the board member responsible for the business, Wolfgang Strassl.

Management was working to turn around the U.S. health business but was also looking at all options and expected to take a decision on the unit by the end of this year, von Bomhard said.

Munich Re on Feb. 5 unveiled preliminary earnings for 2012 and said it would raise its dividend to 7 euros per share, exceeding consensus for 6.76 euros.

($1 = 0.7684 euros) (Additional reporting by Jonathan Gould; Editing by Alison Birrane and Paul Casciato)

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