Munich Re dodged subprime bullets to post record earnings for 2007 and said it would propose raising its dividend by more than one fifth, boosting its shares by more than 3 per cent.
The world's second-biggest reinsurer unveiled preliminary net profit of €3.9 billion ($5.8 billion) for 2007 after trimming its exposure to the risky US mortgage market and said risks from US monoline bond insurers were relatively small.
"Our prudent investment policy and healthy scepticism towards excesses in individual markets have proved justified," Munich Re Chief Financial Officer Joerg Schneider said in a statement today, a month before it was due to report.
Munich Re booked losses of less then €10 million in the fourth quarter on investments exposed to the subprime market, after writing down about €150 million in the first nine months of last year.
This cut its holdings of subprime-exposed investments to €340 million or less than 0.2 per cent of its overall portfolio.
The news came the same day that Swiss bank UBS unveiled another $4 billion in surprise write-downs as the financial sector reels from spreading credit market turmoil.
Munich Re also held about €320 million in bonds guaranteed by US bond insurers but said their values would hardly be affected even without the guarantees.
"At most only a very low two-digit million write-down would have to be made," it said.
Munich Re could take a hit by covering risks from lawsuits against financial institutions with Directors & Officers insurance, but had made provisions for the claims, it said.
Full-year net profit was above analysts' median forecast of €3.83 billion, according to Reuters Estimates. Munich Re itself had said it hoped to achieve slightly more than €3.8 billion in net profit for the year.