Munich Re profit almost wiped out

German reinsurance giant Munich Re has seen its quarterly profits almost wiped out because of the financial crisis and claims for hurricane damage.

Third quarter profits fell by 99% to 12m euros (£9.7m; $15.4m) from 1.2bn euros in the same period last year.

The world's biggest reinsurer has abandoned its 2008 profit forecast as it said markets were too "volatile".

Reinsurers help spread risks by selling cover to other insurers, so the industry can deal with large losses.

Joerg Schneider, Munich Re's chief financial officer, said: "The 2008 financial year is proving difficult on account of the financial crisis.

"The ongoing volatility of the markets does not permit a reliable profit forecast for the year as a whole."

Falling profits

Munich Re had hoped to make a profit of 2bn euros this year.

However, the financial crisis and the impact of Hurricanes Ike and Gustav in the Caribbean and the United States, have drastically affected its earnings since July.

It is the second time the firm has had to cut its profit forecast for this year. It had originally expected to make up to 3.4bn euros in 2008.

Despite the plunge in its quarterly profits, Munich Re nonetheless plans to pay its shareholders a 2008 dividend which will be equivalent to the one it paid out in 2007, of 5.5 euros per share.

The global financial market turmoil has wreaked havoc on many of the insurance industry's investments.

On 5 November, rival reinsurer, Hannover Re, reported its first third quarter net loss since 2005 - blaming higher damage claims due to hurricanes, and the global financial crisis.

However, Munich Re and other reinsurers hope the financial turmoil will boost demand for the risk cover they offer to other insurers.

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