(Adds Swiss Re, Munich Re comment, analysts)
* Munich Re to buy back shares worth 3.6 pct of market cap
* Munich, Swiss net profit down in Q3 but beat consensus
* Swiss Re mulls special dividend
* Swiss Re shares rise 1.8 pct, Munich Re down 1.0 pct
By Jonathan Gould and Alice Baghdjian
FRANKFURT/ZURICH, Nov 7 The world's two biggest
reinsurance companies, Munich Re and Swiss Re
, prepared to reward shareholders by handing back cash
in a year that saw both avoid massive claims for disasters like
hurricanes or earthquakes.
Industry leader Munich Re on Thursday unveiled plans to buy
back up to 1 billion euros ($1.35 billion) of its own shares in
the coming months, hoping to cheer investors after a fall in
Swiss Re, which saw quarterly net profit halve to $1.1
billion, said it was open to paying a special dividend for the
second year running, depending on its full-year results.
Despite the quarterly profit declines, both companies'
results turned out better than analysts had expected and both
said they were still on track to reach their earnings targets.
"Today the firm is in a very strong position from a capital
perspective," Swiss Re Chief Financial Officer George Quinn told
a media conference call.
"We have the luxury. We can contemplate a number of
different possibilities and even a combination," he added.
Analysts busily began to pencil in the impact on dividends.
Stefan Schuermann of Vontobel saw a special dividend of 3.5
Swiss francs and said the ordinary dividend could rise to 4.0
francs from the 3.5 paid for 2012. Swiss Re paid a special
dividend of 4.0 francs for last year.
Reinsurers have been hit by some big localised claims this
year, such as hail storms and flooding in Germany, but have not
faced the massive payouts for hurricanes or earthquakes they saw
in recent years, creating leeway for improved dividends or share
Reinsurers, which provide a financial backstop to insurance
companies facing big claims in exchange for part of the premium,
have also found it difficult to put their cash to work
profitably because of low interest rates and increasing
competition from pension and hedge funds.
These alternative investors have been providing reinsurance
in lucrative markets like U.S. hurricane risk, driving down the
pricing power of traditional reinsurers like Munich and Swiss.
The threats have clouded reinsurers' prospects.
Munich Re shares have risen 11 percent so far this year,
underperforming the STOXX Europe 600 insurance index,
which is up 24 percent since Jan. 1. Swiss Re shares have also
lagged the sector index, but only modestly.
Munich Re said returning capital to shareholders would help
bolster reinsurance underwriters' self-discipline in maintaining
their pricing power over insurance companies.
"Our goal is to have an acceptable capital position but not
an excessive one," Chief Financial Officer Joerg Schneider said.
Schneider's boss, CEO Nikolaus von Bomhard, had raised the
possibility of a share buy-back as early as March, and the 1
billion euro figure is consistent with Munich Re's track record.
It bought back on average 1 billion euros worth of its own
shares annually between 2006 and 2011.
"The announced share buy-back programme with a volume of 1
billion euros exactly matches our expectations but is still
positive," said DZ Bank analyst Thorsten Wenzel in a note.
Munich Re's share fell 1 percent by 1245 GMT, while Swiss Re
got a more positive reaction, its shares rising 2.3 percent.
The STOXX Europe 600 insurance index rose 0.5
($1 = 0.7392 euros)
(Additioanl reporting by Kathrin Jones; Editing by Noah Barkin
and Tom Pfeiffer)