Munich Re, one of the largest reinsurers by gross premiums world-wide alongside Swiss Reinsurance Co., also issued a full-year target, saying it was confident of reaching an after-tax profit before minorities of between €2.2 billion and €2.5 billion (between $3.3 billion and $3.7 billion) in 2009.
"If the rest of the financial year goes so well, we may even reach our ambitious target of a return on risk-adjusted capital … of 15% after tax," said Chief Financial Officer Jörg Schneider. He said in August that a €2.5 billion profit would be equivalent to a return on risk-adjusted capital of 15%.
In the most recent quarter, global reinsurers benefited from low costs for large-disaster claims that were limited to small damages caused by hailstorms in Central Europe and Canada, an industrial-fire claim in Russia and a flood in the Philippines.
Around this time last year, insurers had to pay for large claims caused by Hurricanes Gustav and Hurricane Ike, which -- in combination with the widening financial crisis -- caused several of them to warn on profits. Ike alone caused an estimated sector loss of $15 billion to $20 billion.
Munich Re's net profit was €644 million for the three months ended Sept. 30 compared with a €3 million net loss a year earlier. Gross premium income rose 12% to €10.36 billion from €9.27 billion, helped by the contribution of newly acquired businesses.
Revenue in property-casualty reinsurance benefited from the acquisition of engineering-insurance specialist Hartford Steam Boiler Inspection and Insurance Co. Life-health reinsurance premiums, meanwhile, were pushed up by nine large five-year life-reinsurance contracts signed earlier this year. For the full year, Munich Re expects gross premiums of €40 billion to €42 billion.
The company's investment result more than tripled to €2.24 billion from €662 million in the third quarter, while net write-downs dropped sharply to €168 million from €1.17 billion.
Nonetheless, Munich Re was cautious investment returns for the coming years, saying it prefers "a solid return on a well-balanced, not-too-risky investment portfolio" that should generate investment returns "distinctly below 4%" in a low-interest-rate environment. Return on investment in the third quarter was 4.9%.
Finance Chief Schneider said there was a high probability that after-tax profit including minorities will top €2 billion next year. In 2010, the company should be able to protect high reinsurance margins and will benefit from significantly higher health-insurance prices, analysts at LBBW said in a note.
Munich Re said it aims for a 2009 dividend payment of least €5.50 a share, unchanged from 2008, but added that it was too early to make a definite announcement.
Konrad Becker, an analyst at Merck Finck said it remains questionable whether Munich Re will raise its dividend despite its share-buyback program. Munich Re resumed share buybacks on Oct. 1 and has spent €176 million so far. It plans to spend up to €1 billion on buybacks by April 28.