Reinsurer Munich Re AG’s fourth-quarter profit declined 38 per cent to C480 million ($663 million) due to “weighty major losses” such as the devastating floods in Australia, the company said.
The earnings for the October-December period compared with net profit of C780 million a year earlier. Full-year earnings in 2010 slipped to C2.43 billion from C2.56 billion amid higher costs resulting from natural disasters.
But the company still plans to raise its dividend to C6.25 per share from the previous year’s C5.75 – a move certain to please its shareholders, among them U.S. billionaire Warren Buffett’s investment firm Berkshire Hathaway, which since last year has accumulated a 10 per cent stake.
Munich Re also plans to buy back shares for up to C500 million before next year’s annual meeting. Since the buyback program’s launch in May, Munich Re bought back shares worth some C750 billion.
Chief Financial Officer Joerg Schneider said that “despite weighty major losses, which also affected us at the end of the year, we are presenting a good result.”
Schneider gave a cautious outlook for 2011, expecting “a somewhat better technical result than in 2010 and a consolidated result of around the same level.”
Munich Re’s reinsurance business in 2010 was marked by high claims costs for major losses, but its premium income grew by over 8 per cent from C21.8 billion to C23.6 billion.
Full-year costs from natural catastrophes in 2010 for Munich Re were sharply up from C200 million to C1.56 billion. The most costly single event was February’s earthquake in Chile, at $1 billion.
For September’s earthquake in New Zealand, Munich Re is expecting claims of C340 million.
The largest individual loss in the fourth quarter stemmed from the flooding in Queensland, northeastern Australia, with claims totaling C270 million, Munich Re said.
With the floods continuing into the first weeks of January, and Brisbane seeing its worst floods for more than three decades, the company expects about the same costs for the first quarter of 2011.
The Munich-based company’s primary insurance business, ERGO Insurance Group, saw its 2010 gross premium grow by 5 per cent to C17.5 billion. It more than doubled its profit from C173 million to C355 million.