MUNICH (Bloomberg) — Munich Re, the world's second-biggest reinsurer, reported a 69 percent increase in third-quarter profit, buoyed by a tax gain, and said it may surpass an earnings forecast for this year.

Net income rose to 1.2 billion euros ($1.74 billion), or 5.63 euros a share, from 707 million euros, or 3.11 euros, a year earlier, the Munich-based company said in a statement yesterday.

Munich Re, which helps insurers such as Allianz SE shoulder risks, booked a one-time tax credit of 395 million euros because of changes in German rules. Full-year net income before minority interests may be "slightly above" the reinsurer's August forecast of 3.5 billion euros to 3.8 billion euros, chief financial officer Joerg Schneider said in the statement.

"The new full-year target isn't overly ambitious," said Dieter Ewald, who helps manage about $21.7 billion at Frankfurt Trust, including Munich Re shares. "But one shouldn't forget that the period of European winter storms is about to begin."

Net income before minority interests stood at 3.35 billion euros after the first nine months of the year, following the tax gain and an absence of major payouts for natural disasters.

Munich Re shares declined 1.96 euros, or 1.5 percent, to 128.67 euros by 1.10 p.m. in Frankfurt, as financial stocks tumbled across Europe.

For a second year in a row, no major hurricane has struck the US during the Atlantic storm season, which began in June and officially ends this month. Munich Re's largest claims in the third quarter, amounting to about 60 million euros before tax, were related to Hurricane Dean. The company suffered smaller damages from earthquakes in Japan and Peru and floods in Britain.

Munich Re reiterated that it will resist "mounting pressure" on the industry to lower prices following the absence of costly storms.

In 2005, hurricanes including Katrina, Rita and Wilma cost insurers more than $58 billion in the worst storm season on record, leading reinsurers to more than double rates in some areas.

Operating profit fell 13 percent to 1.1 billion euros in the quarter as spending on claims and other costs at the property and casualty reinsurance unit rose to 97.1 cents of each euro of premium income from 90.4 cents a year earlier.

Munich Re repeated a target for a combined ratio of below 97 percent this year.

Losses linked to the US subprime mortgage market rout amounted to about 115 million euros in the quarter.

"Disposals have considerably diminished the remaining exposure to subprime- related securities to 374 million euros," or 0.2 percent of its total investments, the reinsurer said.