FRANKFURT, Germany – Munich Re, the world's largest reinsurance company, on Thursday reported it lost $1.06 billion in the third quarter because of claims from the Sept. 11 terror attacks that are expected to be the largest in the company's more than 120 years in business.
But the company said it expected to be profitable for the year and would pay a dividend to shareholders.
The third-quarter loss of 1.21 billion euros was about what stock market analysts expected. Estimates by analysts polled by Dow Jones Newswires averaged 1.18 billion euros.
Analysts were also watching to see whether Munich Re would raise the damage figure from Sept. 11, as late claims came in. But the company held firm with its previous figure of 2.1 billion euros ($1.84 billion) for its share of the damage claims.
Its stock rose 3.14 percent to 296.01 euros ($260.48) on the Frankfurt exchange.
The third quarter results were "completely overshadowed" by the attacks, chief executive Hans-Juergen Schinzler said in a statement. "Sept. 11 represented the biggest loss in Munich Re's more than 120-year history," Schinzler said.
The Sept. 11 claims were charged against earnings for the July-September period for accounting purposes, though the actual payouts will continue into next year, said Munich Re, which was founded in 1880.
The Munich-based company, which holds its reserves in the form of stocks and bonds, was also hit by drops in financial markets due to the attacks and the sluggish world economy, Schinzler said.
Losses also came from Bayer's withdrawal of its anti-cholesterol drug Lipobay, marketed as Baycol in some countries, in August after it was linked to more than 50 patient deaths worldwide. Further claims came from the Sept. 21 explosion of a chemical plant in Toulouse, France, and from Typhoon Nari, which killed 90 people in Taiwan and crippled the subway system in the capital Taipei.
The company said it earned 85 million euros ($75 million) in the first nine months of the year, and planned to pay a dividend of 1.25 euros ($1.10).
There was no comparison to last year's earnings because Munich Re was reporting third-quarter and nine-month earnings for the first time.
The company did provide a comparison of premium income, saying it was up 20 percent in the third quarter from the same period the year before, to 8.77 billion euros ($7.72 billion)
Insurance industry analysts say that big reinsurance companies like Munich Re are in relatively good shape and are likely to weather the Sept. 11 attacks because the claims will be spread among a number of companies, and because smaller competitors may simply get out of the reinsurance business due to heavy losses.
Reinsurers insure other insurance companies, sharing risk so the system can cover catastrophic losses.
Munich Re said the insurance industry had to fundamentally review how it insured against terrorism, saying the risk of such attacks could not be statistically predicted like natural disasters can be.
"These risks defy the application of mathematical probabilities," Schinzler said.
The company said terrorism coverage now would have to be subject to clear limits on damages and what is covered. Reinsurance companies like Munich Re are currently in the process of negotiating next year's coverage with primary insurance companies, a process that usually lasts until the end of the year.
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