According to the reinsurer's website, full-year net income before minority interests fell to 1.5 billion euros ($2 billion) from a record of 3.9 billion euros in 2007. Earnings missed the 1.7 billion-euro estimate of Bernd Mueller-Gerberding, an analyst at UniCredit in Munich.
Munich Re cut its earnings outlook twice last year as a 42 percent decline in global stock markets forced insurers and reinsurers to write down the value of their equity investments. Reinsurance rates in January, when two-thirds of the property and casualty portfolio was up for renewal, rose by 2.6 percent, less than the double-digit increase the company targets for this year.
“Additional write-downs in the fourth quarter were a burden for net income,” Mueller-Gerberding, who recommends buying the shares, wrote in a note to clients today. “Regarding the renewals, Munich Re did not fully meet its own, bullish ambitions.”
Munich Re fell 4.60 euros, or 4.3 percent, to 102.88 euros at 10:32 a.m. in Frankfurt. They have lost 7.3 percent since the beginning of the year, giving the company a market value of 21.2 billion euros.
The fourth-quarter profit was “around” 100 million euros, Munich Re said. That compares with net income before minorities of 589 million euros reported for the year-ago quarter.
The company, which is scheduled to report detailed fourth-quarter and full-year earnings on March 3, reiterated it will pay an unchanged dividend of 5.50 euros per share for 2008.
Premium volume in the January renewals of property and casualty reinsurance contracts fell by about 3 percent to around 8 billion euros, Munich Re said.
“Certainly not all our expectations were fulfilled,” said Torsten Jeworrek, Munich Re’s management board member responsible for reinsurance. “The development of the economy has not yet led to a situation in all markets where the players recognize the need for prices, terms and conditions that are consistently risk-adequate.”