* To "slightly surpass" 2012 net profit target
* Net profit target was about 2.5 billion euros
* Q2 helped by rising premiums, underwriting performance
* Shares up 1.1 percent
(Adds analyst comment, detail)
By Jonathan Gould
FRANKFURT, Aug 7 Munich Re, the
world's biggest reinsurer, expects to beat its 2012 net profit
target of 2.5 billion euros ($3.1 billion) after rising premiums
and improved underwriting performance boosted the German group's
"We are well on track to slightly surpass the originally
envisaged profit for the year," chief executive Nikolaus von
Bomhard said, adding the group would benefit in the second half
from funds no longer needed to cover past damage claims.
Munich Re cited the potential for big damage claims from
hurricanes in the second half and expected triple-digit million
euro restructuring costs at insurance unit Ergo as reasons for
not raising its 2012 target more significantly.
It had been expected to post a net profit of 2.6 billion
euros this year, according to a Reuters poll.
Munich Re shares were up 1.1 percent to 118.85 euros by 1040
GMT on Tuesday, outpacing a 0.3 percent higher DAX
Its second quarter saw payouts for big damage claims fall
nearly a third to 452 million euros. Munich Re expected claims
for crop failure after a drought in the United States to cost
around 160 million euros.
A quarterly net profit of 808 million euros topped the
highest forecast for 801 million in the Reuters poll and
compared with an average forecast for 696 million.
In contract renewals with insurance company clients in
Australia, Latin America and the United States in July, Munich
Re managed to boost premium volumes by 18.5 percent while also
raising prices about 2 percent.
LOW YIELD HEADACHE
Munich Re said low yields on its 190 billion euro portfolio
of fixed-income securities remained a major threat for which it
was trying to compensate through price increases and greater
"Munich Re deems the challenge of the still very low
interest rate levels to be far greater than that of the
volatility of the financial markets or the worsened global
economy," it said.
The company has further reduced its investments in
government bonds from southern European countries, it said.
While Munich Re shares have risen a quarter in value this
year, they lag the 30 percent gains at rivals Hannover Re
and Swiss Re.
Data from StarMine, which weights analyst forecasts
according to their track record, showed Munich Re trading at 7.6
times 12-month forward earnings, a discount to Hannover Re,
which trades at a multiple of 8.0, and Swiss Re at
($1 = 0.8056 euro)
(Editing by Dan Lalor)