FRANKFURT, Germany - Reinsurer Munich Re AG said Wednesday it expects to post a bigger profit in 2007 than last year, beating its previous target of more than $5.17 billion.
The Munich-based company, the world's No. 2 reinsurer behind Swiss Re, is scheduled to release its complete fourth-quarter and 2007 results on Feb. 25. It said its 2007 profit is expected to reach 3.9 billion euros ($5.76 billion), compared with a profit of 3.5 billion euros in 2006. The 2007 figure is also higher than the previously forecast range of 3.5 billion euros to 3.8 billion euros ($5.2 billion to $5.6 billion), the company said.
Reinsurance companies sell backup coverage to other insurers, spreading risk so the system can handle losses from major disasters. Munich Re was overtaken as the largest in the industry last year when Swiss Re completed its takeover of General Electric Inc.'s reinsurance operations.
Munich Re also allayed investors' fears that the subprime mortgage crisis could affect its results and said it expected less than 10 million euros ($14.77 million) in fourth-quarter write-downs, bringing its total exposure to such mortgage loans to 340 million euros ($502.3 million), or less than 0.2 percent of its total investment portfolio.
"Our prudent investment policy and healthy skepticism toward excesses in individual markets have proved justified," said Chief Executive Joerg Schneider in a statement. "We have a well-balanced investment portfolio. Our restraint with regard to credit risks in recent years, because risk spreads were completely inadequate, is now paying off for us."
The company also said it will propose a shareholder dividend of 5.50 euros ($8.13) a share, up from the 4.50 euros ($6.65) per share dividend it paid out in 20906.
Munich Re operates Ergo, one of Germany's biggest insurers, and Munich Reinsurance America Inc.
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