German reinsurer Munich Re drops 2010 target

The German reinsurance giant Munich Re declined Tuesday to give a detailed outlook for 2009 and said its former 2010 target for earnings per share was now out of reach.

The world's second biggest re-insurance company confirmed results initially released in early February, but chairman Nikolaus von Bomhard was quoted as saying: "We would not be acting in the interests of our shareholders if we tried to compensate for low returns with higher risk tolerance."

As a result, the 2010 target of 18 euros (22.75 dollars) earnings per share set "before the beginning of the capital market crisis is no longer realistic," von Bomhard said.

A group statement added that "owing to the still very difficult conditions for the global economy and the volatility on the financial markets, Munich Re is not giving a prognosis for the 2009 annual result."

Von Bomhard nonetheless told a press conference in the southern city of Munich: "We are working on the principle that we will not fall into the red in 2009."

On February 4, Munich Re posted a net profit of 1.5 billion euros for 2008, which included a slight gain of 133 million euros in the last quarter.

That compared with a profit of 3.9 billion euros for 2007, and 552 million euros in the fourth quarter of that year, a group statement said.

The results were "undermined by a 55 percent rise in income taxes and higher claims costs for natural disasters," it explained.

The group said it would nonetheless keep the 2008 dividend unchanged at 5.50 euros per share.

Last month, the world's biggest reinsurer Swiss Re posted its biggest annual loss ever of 864 million Swiss francs (735 million dollars, 585 million euros) for 2008, saying earnings were hit by investment losses.

But Munich Re's business model, which combines reinsurance activities with the direct issuance of policies, "proved its worth" amid turbulence that has rocked financial markets, von Bomhard told the Munich press briefing.

Dow Jones Newswires quoted Merck Finck analyst Konrad Becker as saying that the cut in the 2010 earnings per share forecast "isn't dramatic" because it confirmed already lower consensus forecasts.

Becker said Munich Re's inability to give an earnings forecast for this year was not positive, but noted that it was a problem faced by the financial sector in general this year.

Shares in the group fell by 0.80 percent to 91.42 euros in midday trades on the Frankfurt stock exchange.

FRANKFURT, Tuesday, AFP