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Munich Re Refocuses 2010 Profit Goal as Earnings Drop

Posted on 03 Mar 2009

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The world's biggest reinsurer, Munich Re, is rethinking its profit goal for 2010 and said fourth-quarter earnings fell 76 percent on higher claims.

A target for profit of 18 euros a share next year "is out of reach" because investment returns will miss the reinsurer's goal of 4.5 percent, the Munich-based company said in an e-mailed statement today. Fourth-quarter net income slid to 133 million euros ($168 million) from 552 million euros a year earlier.

“The focus is on securing sustained profitable development rather than on short-term maximization of profits,” Chief Executive Officer Nikolaus von Bomhard, 52, said at a press conference today. “We would not be acting in the interests of our shareholders if we tried to compensate for low returns with higher risk tolerance.”

Munich Re posted a 61 percent drop in profit last year to 1.5 billion euros as the worst financial crisis since the Great Depression battered stock markets. The Dow Jones Stoxx 600, a benchmark for Europe, tumbled 46 percent, forcing Munich Re to twice cut profit goals last year.

Munich Re reiterated plans to pay an unchanged dividend of 5.50 euros a share for 2008.

While Munich Re intends to carry out further share buybacks, “their benefits will have to be weighed up very carefully against the advantages of comfortable capitalization, also with a view to opportunities for profitable growth,” Chief Financial Officer Joerg Schneider said in the statement.

Munich Re aims to repurchase 5 billion euros of stock by 2010, and has bought back 2 billion euros under that program. It has also repurchased more than 80 percent of the 1 billion euros of stock scheduled to be completed by the next annual shareholders meeting on April 22, according to its website.