BERLIN (AP) -- Reinsurer Munich Re AG said Friday that it barely eked out a profit in the third quarter as its investments were hurt by falling stock markets, forcing the company to abandon its full-year earnings forecast for the second time this year.
Munich Re reported a net profit of 7 million euros ($9 million) in the July-September period, a tiny fraction of the 1.2 billion euros it earned a year earlier.
"The 2008 financial year is proving difficult on account of the financial crisis," chief financial officer Joerg Schneider said in a statement. "In view of the considerable share price losses, our annual profit will probably not reach 2 billion euros," or $2.6 billion.
He added that a "reliable profit forecast" was not possible in light of the ongoing market volatility.
Munich Re had already issued a profit warning in July, when it backed off a full-year forecast of between 3 billion and 3.4 billion euros ($3.9 billion and $4.4 billion) and said it expected instead to earn "well above 2 billion euros."
It said however that its dividend per share this year should still reach last year's level of 5.50 euros ($7.07).
Reinsurers sell backup coverage to other insurers, spreading risk so the system can handle large or widespread losses. Munich Re also operates Ergo, one of Germany's biggest insurers, and Munich Reinsurance America Inc.
In the third quarter, declining share prices on markets pushed down the company's investment result by two-thirds, to 674 million euros ($867 million) from nearly 2 billion euros. However, gross premiums increased by 1.3 percent to 9.3 billion euros ($11.9 billion) from nearly 9.2 billion euros.
CFO Schneider stressed that "Munich Re's capital base remains solid."
Munich Re said Caribbean hurricanes Gustav and Ike accounted for pretax costs of some 90 million euros ($116 million) and 300 million euros ($386 million) respectively in the third quarter.
Munich Re said the spread of the financial crisis, causing the collapse of companies such as American International Group Inc. and Washington Mutual, has had "no notable impact" so far on its own results.
But it said its business ties with the failed Lehman Brothers Holdings Inc., involving "various capital market transactions," led to net write-downs of about 115 million euros ($148 million).
Munich Re shares closed up 6.9 percent in Frankfurt at 102.97 euros ($131.30).
The earnings figures were "not too far from expectations" and the abandonment of the full-year outlook was expected, said Bernd Mueller-Gerberding, an analyst with UniCredit.
"We think Munich Re should be able to benefit from an expected trend toward higher prices in the upcoming renewals season," he wrote in a research note.
Earlier this week, rival Swiss Reinsurance Co. posted a net loss of 304 million Swiss francs ($258 million) for the third quarter.
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