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UPDATE 2-Munich Re to buy back up to 1 billion euros of shares
March 20, 2014 / 7:30 AM / 4 years ago

UPDATE 2-Munich Re to buy back up to 1 billion euros of shares

* Sees net profit of 3 bln euros in 2014 vs 3.3 bln in 2013

* To buy back up to 1 bln euros own shares by April 23, 2015

* Munich Re shares rise 2 pct, outperforming market (Adds Munich Re board member comment, context, shares)

By Jonathan Gould

MUNICH, March 20 (Reuters) - Munich Re has unveiled new plans to buy back up to 1 billion euros of its shares, providing more evidence that reinsurance companies are reluctant to pour money into the reinsurance market where prices are falling.

The world’s largest reinsurer Munich Re and peer Swiss Re have been returning cash to shareholders in the form of higher dividends or share buy-backs as prospects have narrowed for profitably investing the cash into the reinsurance market.

Reinsurers, which help insurers spread risk in exchange for part of the profit, are facing pressure on prices partly from the absence of big natural disasters such as hurricanes in the last two years, which has pushed customers to demand lower premiums. The price pressure has been compounded by competition in reinsurance from pension funds looking for higher returns.

Munich Re said it would buy back up to 1 billion euros ($1.4 billion) of its own shares by its April 23, 2015 shareholder meeting. It has yet to conclude a current share buyback programme which also targets up to 1 billion euros by this year’s shareholder meeting on April 30.

“With this share buy-back, we are again paying out currently unneeded capital to shareholders,” Munich Re Chief Executive Nikolaus von Bomhard said in a statement. He said the plan was contingent on there being no unusually large upsets from capital markets or damage claims.

Analysts had expected Munich Re to launch a new buy-back programme, but thought the announcement was more likely to come around November, when possible damage claims from the Atlantic hurricane season would become clear.

Munich Re shares were up 2 percent in early trading, among the top gainers in a 0.5 percent weaker German blue chip index .

Munich Re also said it expected a net profit of 3 billion euros this year, down from 3.3 billion in 2013 - its third best year on record - but said the goal was ambitious given rock-bottom interest rates and an expected higher tax rate.

Analysts expect net profit of 2.9 billion euros this year on average, according to Thomson Reuters I/B/E/S.

The company had already announced a dividend hike to 7.25 euros per share for 2013 from 7.00 euros, after below average damage claims from disasters like hurricanes and earthquakes helped bolster earnings.

Munich Re said it saw no let-up in the price pressure when reinsurers renew contracts with insurance companies in the United States, Australia and Latin America in April and July.

“Given our strong position on the market, we expect to be able to limit the effects on our own portfolio,” Munich Re board member Torsten Jeworrek said. ($1 = 0.7189 Euros) (Editing by David Holmes and Jane Merriman)

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