MUNICH (Bloomberg) - Munich Re, the world's biggest reinsurer, plans to resume its share buyback after posting a first-quarter profit that beat estimates. The shares fell as the company signaled it may be harder to reach a full-year target.

Munich Re will purchase as much as one billion euros ($1.27 billion) of its own stock by the 2011 annual shareholders' meeting scheduled for April 20, 2011, it said in a statement distributed by the DGAP newswire on Friday. First-quarter net income rose 11 percent to 482 million euros, the Munich-based company said separately.

The full-year profit forecast, which the reinsurer reiterated last month, has become "increasingly ambitious" following a number of claims from natural disasters, chief financial officer (CFO) Joerg Schneider said in the statement. The company is targeting 2010 net income before minority interests of more than two billion euros.

Net income in the quarter beat the 414 million-euro median estimate of nine analysts surveyed by Bloomberg. Claims costs from catastrophes including the earthquake in Chile, hailstorms in Australia and Western Europe's winter storm Xynthia, rose to about 700 million euros in the first three months from 187 million euros a year ago, the reinsurer said.

Munich Re fell 1.7 percent to 102.30 euros at 11.01 a.m. local time. The shares have dropped 5.7 percent this year, while the Bloomberg Europe 500 Insurance Index has lost 10 percent. The company has a market value of about 20.2 billion euros.

Investment income climbed 80 percent to 2.46 billion euros in the quarter, compared with analysts' median projection of 1.94 billion euros. The result was helped by 655 million euros in net gains on disposals, "largely" from the sale of corporate bonds, according to Munich Re.

"We will not be able to maintain this level and with it the high returns in the next few quarters," CFO Mr. Schneider said.

"The fragile capital market environment is certainly a serious threat to insurance companies, which are significant sovereign bond investors," Thorsten Wenzel, an analyst at DZ Bank AG who has a "hold" rating on the stock, wrote in a note to investors. "Against this background we believe Munich Re should keep its excess capital on board for the time being."

The share buyback would complete Munich Re's original programme announced in 2007 as the reinsurer seeks to woo investors including Warren Buffett and his Berkshire Hathaway Inc., Munich Re's biggest shareholder, as well as asset manager BlackRock Inc. The company repurchased as much as one billion euros of its stock before this year's general meeting on April 28. The programme was put on hold amid the financial crisis.

Swiss Reinsurance Co., the second-biggest reinsurer, yesterday said first-quarter profit climbed 22 percent to $158 million as excess capital grew by a third. That raised the prospects for a share buyback after Buffett is paid back, whose Berkshire Hathaway injected $3 billion in the Zurich-based firm.

The Deepwater Horizon oil rig that caught fire and sank in the Gulf of Mexico may result in a material-damage burden of about 60 million euros while liability claims "cannot be predicted accurately owing to their complexity," Munich Re said, adding that total claims are expected at "a low triple-digit million-euro amount at most".

The disaster may lead to the biggest energy insurance losses in more than 20 years, according to Catlin Group Ltd. The April 20 explosion is likely to be the biggest energy market insurance loss since the Piper Alpha oil platform fire in 1998, the Hamilton, Bermuda-based insurer said on Friday.

Swiss Re said on Thursday that it estimates its loss from the explosion of the rig to be $200 million before tax and expects a total insured market loss of $1.5 billion to $3.5 billion.

Because of this year's catastrophes, Munich Re's target for a combined ratio of about 97 percent "over the cycle" is likely to be exceeded in 2010, the company said.

The property and casualty reinsurance unit's combined ratio, or spending on claims and costs as a percentage of net premiums, worsened to 109.2 percent in the quarter, the highest level since hurricanes Katrina, Rita and Wilma made landfall in the US in 2005. That compares with a ratio of 97.3 percent a year earlier.

The first four months' "severe accumulation-loss events" exhausted Munich Re's full-year budget for natural catastrophe claims "to a large extend," CFO Mr. Schneider said on a conference call with journalists on Friday.