By DAVID McHUGHAP Business Writer
FRANKFURT, Germany (AP) - Reinsurance company Munich Re raised its profit forecast for this year despite a large expected bill for damages from Superstorm Sandy.
The company said Wednesday it will make €3 billion ($3.8 billion) this year, up from its previous estimate of €2.5 billion.
The increase comes despite large payouts related to the storm that hit the East Coast of the United States last week. Sandy caused extensive flooding and damage in an area where many people and businesses had insurance. It said those losses couldn't yet be quantified, but that they would be around the "mid three-digit million euro range."
Alongside the higher forecast, Munich Re said third-quarter net profit rose strongly to €1.14 billion from €290 million a year ago. Revenue from gross premiums were up 8.3 percent to €13.2 billion.
Munich Re's share price opened strongly and was trading 3.3 percent higher at €131.75 in early trading in Frankfurt.
The earnings improvement came from lower disaster payouts. Losses from drought in the United States that heavily damaged crops cost the company €160 million, not enough to significantly hold back its results.
Stronger returns on its investments thanks to healing financial markets also helped. The company's investment result rose 65 percent to €2.221 billion.
Munich Re is a big investor because it must find a place to keep the billions it takes in as premiums. Stock and bond markets have bounced back in Europe over the third quarter after the European Central Bank said it was willing to help heavily indebted countries lower their borrowing costs by purchasing their bonds.
Reinsurance companies provide backup coverage for retail insurers so the insurance industry can handle huge disaster losses.
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