FRANKFURT: Munich Re announced a preliminary 8 per cent rise in fourth quarter net profit on Tuesday but only a small profit for the full year after a series of natural disasters.

The quarterly net profit of 530 million euros ($656 million) fell short of the 560 million expected by six banks and brokerages in a Reuters poll.

Its full year net of 392 million euros fell well short of its initial goal of 2 billion to 2.4 billion.

The German reinsurer had warned last year that it could miss its full-year net profit goal after a spate of storms, earthquakes and fires in North America resulted in a big loss in the third quarter.

“In 2018, we will be pressing ahead with the digital transformation of Munich Re, and also seizing opportunities for profitable growth in traditional business,” Chief Financial Officer Joerg Schneider said.

Munich Re shares were indicated to open down 2.6 per cent at Lang & Schwarz, outperforming a 3.9 per cent fall by the DAX index of blue-chip companies.

The results highlight the difficulty faced by the broader industry, as insurers have to pay claims of around $135 billion for 2017, the most ever.

Hurricanes

Last year’s deadly hurricanes Harvey, Irma and Maria in the United States and Caribbean, wildfires in California and earthquakes in Mexico destroyed infrastructure and homes. The sector was already struggling with thin margins, stiff competition and falling prices.

A big question for the industry has been whether the run of catastrophes would allow them to achieve higher prices for their coverage, which have been in decline for years.

Renewals

Munich Re said that the January renewals season for reinsurance showed prices up by about 0.8 per cent, compared with drops of 0.5 per cent in 2017 and 1 per cent in 2016.

A turnaround in prices would be the first major reversal since Hurricane Katrina in 2005. Munich Re is scheduled to release detailed earnings for the fourth quarter and full year on March 15.

The company announced its dividend would remain stable at 8.60 euros per share for 2017, unchanged from 2016. “Our dividend is reliable,” Schneider said.

Reuters