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Munich Re posts $1.2 billion loss
FRANKFURT, Germany (Reuters) -- Munich Re, the world's biggest reinsurer, posted 2002 profits below market expectations on Thursday, hit by billions of euros in writedowns that have also eaten into its cash reserves. The German company said its 2002 net profit was 1.1 billion euros ($1.2 billion), up from 250 million previously, but below the average forecast of 1.86 billion in a Reuters poll of analysts. "The results are worse than expected and it seems like they're in a bigger mess than we thought,'' Andrew Goodwin, an analyst at Commerzbank Securities in London said. Munich Re stock lost more than four percent by 0910 GMT to trade at 72.22 euros, underperforming a weak European insurance sector. The share was trading close to 400 euros in 2000 and has lost almost three quarters of its value over the last 12 months, putting it among the worst performers among Europe's insurers. Last week, Munich Re announced it would tap the bond market to strengthen its balance sheet after a drop in the value of its investments and strategic shareholdings reduced its capital base by 5.4 billion euros to 13.95 billion. Munich Re management board member Joerg Schneider said on Thursday the group would start marketing the debt sale to investors at a road show in the coming days but declined to comment on details of the issue. Writedown seen downIndustry sources told Reuters on Tuesday that Munich Re was seeking to raise some three billion euros to calm nerves about the health of its finances. Schneider also said the group did not expect writedowns on its investments this year to be at the same high level as in 2002 when it had to digest 5.7 billion euros in writedowns, which included its strategic stakes in Germany's second largest bank HVB Group and insurer Allianz. He said he expected several hundred millions in writedowns in the first quarter of this year. Munich Re, which takes on risks that are too large for primary insurers to bear entirely themselves and also runs its own primary insurer Ergo and an asset management business, said the underlying profitability of its business had improved. Adjusted for last year's additional reserve strengthening at its loss-making U.S. business American Re and losses related to the September 11 attack on the World Trade Center, the group's combined ratio -- which measures claims and costs against premium income -- improved to 106.5 from 112.7 percent. Including those factors the ratio was 122.4 percent. The group said it was sticking to its goal of a combined ratio of below 100 percent this year, which would indicate the underlying business is profitable without investment gains. In the fourth quarter alone, Munich Re suffered a 2.2 billion euro net loss after writedown charges of 1.5 billion. Rival Swiss Re, the world's second largest reinsurer, said on Thursday it was cutting its dividend after posting a 2002 net loss of 91 million Swiss francs. Munich Re said premium income -- income from selling reinsurance and insurance cover to clients -- rose 10.8 percent to 40 billion euros, driven by a continued upswing in its reinsurance business. It said it would propose to its shareholders a dividend of 1.25 euros per share, unchanged from the previous year. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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