The world's largest reinsurance company, Munich Re, reported a sharp drop in profits after record outlays in natural disaster compensation last year. But fourth-quarter earnings show signs of improvement.
Munich Re said Thursday that it recorded a profit of 710 million euros ($935 million) last year, marking a 71 percent drop in the company's income. In 2010, the world's largest reinsurer posted a profit of 2.43 billion euros ($3.19 billion).
Reinsurance companies issue backup insurance for primary insurers, enabling them to handle large losses.
Munich Re attributed the sharp decline in profits to a series of severe earthquakes and weather-related catastrophes, as well as the sovereign debt crisis in the eurozone.
"We've never experienced a year like 2011 before," said the company's chief financial officer Jörg Schneider, adding that it was "a notable achievement" that Munich Re was posting a profit at all.
Year of disasters
In 2011, total claims from natural disasters worldwide amounted to $105 billion (79.9 billion euros), and were even higher than in the previous record year 2005, when Hurricane Katrina struck the United States.
Munich Re said that from this total it had to cover losses to the tune of 4.5 billion, with the tsunami disaster in Japan, the earthquake in New Zealand and the floods in Australia and Thailand proving to be the "most extreme burdens" on the company's earnings.
The largest loss in the fourth quarter was from flooding in Thailand, with claims costing around 500 million euros.
Munich Re also saw its profits more than halve in the third quarter as a result of the substantial fall in the value of Greek government bonds and the volatility in exchange rates stemming from the eurozone debt crisis.
However, the company got "back on track" in the fourth quarter, Schneider said, as profits soared 33 percent to 630 million euros from 480 million in the fourth quarter of 2010.
"We expect a significantly improved technical result for 2012," he added.
In spite of the profit decline, Munich Re said it planned to pay shareholders an unchanged dividend of 6.25 euros per share.
Author: Uwe Hessler (AFP, dapd, AP)
Editor: Michael Lawton