MUNICH (Bloomberg) — Munich Re, the world’s second-largest reinsurer, reported a 45 percent increase in third-quarter profit and raised its full-year earnings forecast as damage claims plunged a year after Hurricane Katrina.Net income climbed to 715 million euros ($912 million), or 3.15 euros a share, from 494 million euros, or 2.17 euros, a year earlier, the Munich-based company said. The shares fell from an almost four-year high as earnings missed analysts’ estimates.

Munich Re, which helps insurers such as Allianz SE shoulder risks for clients, said it will spend as much as 1 billion euros buying back shares under a first-ever repurchase plan. Chief executive officer Nikolaus von Bomhard fuelled profit by doubling premium rates in some storm-affected areas and cancelling policies deemed too risky after last year’s record US hurricane season.

“The main earnings driver was the shortfall of big claims,” Konrad Becker, an analyst at Merck Finck & Co. in Munich who recommends buying the stock, said in a note.

Munich Re shares fell 2.32 euros, or 1.8 percent, to 128.68 euros at 4.10 p.m. in Frankfurt, after climbing 3.5 percent on Monday. The stock is up 12 percent this year, compared with a 14 percent gain in the Bloomberg Europe 500 Insurance Index.

Net income will reach between 3.2 billion euros and 3.4 billion euros this year, Munich Re said today, above a previous estimate of as much as 2.8 billion euros. Chief Financial Officer Joerg Schneider said he would be “surprised” if next year’s earnings were below 3 billion euros, though that will depend on variables such as contract renewals in January.

The share buyback would retire about 3.4 percent of Munich Re’s shares outstanding, the company said. The reinsurer was authorised to buy back as much as ten percent of its stock at the last annual shareholders meeting.

“Given the clearly higher excess capital the share buyback’s volume is disappointing,” wrote Robert Mazzuoli, an analyst at Landesbank Rheinland-Pfalz in Mainz, in a note to clients. He rates Munich Re “market perform”.

Stock repurchase plans will “from now on be as normal for Munich Re as dividend payouts”, Schneider told reporters on a conference call.

The company plans to raise its dividend “significantly” this year, while keeping the payout as a proportion of earnings at “not much more” than 25 percent, Schneider said. The payout ratio stood at 25.7 percent in 2005.

Standard & Poor’s said the buyback doesn’t affect its positive outlook on Munich Re’s credit ratings, adding that it “expects to be in a position to finalise its view in December”.

S&P in June said it may raise its A+ rating for Munich Re, after “significant progress” in the company’s operations and signs of improved financial strength.

“We firmly expect a rating upgrade from S&P to the AA level by year-end,” Lucio di Geronimo, an analyst at HVB Group who rates Munich Re shares “outperform,” wrote in a note to clients last month.

This year’s Atlantic hurricane season, which started in June and ends this month, hasn’t resulted in any major storm losses for the insurance industry. Allianz, Europe’s biggest insurer, last week raised its 2006 profit forecast after claims for natural disasters dropped. Warren Buffett’s Berkshire Hathaway Inc. last week said its insurance units fueled an almost fivefold increase in quarterly profit.

Last year’s season saw its first major hurricane landfall on July 10, when Dennis hit Florida’s panhandle. Dennis was followed in late August by Hurricane Katrina, the most expensive disaster in the industry’s history, with estimated claims of about $60 billion, according to Munich Re.

Munich Re’s costs from hurricanes, including Katrina, amounted to 750 million euros after taxes in the third quarter of last year.