Munich Re reported year over year net income dropped 62 percent,but the company still showed a profit despite the economicdownturn, and management is optimistic the slump in premium pricingis over.

"In view of the financial crisis, the result for 2008 issatisfactory," said J?rg Schneider in a statement. "Thanks to ourpronounced risk management and a diversified investment portfolio,we have come through the crisis relatively well so far."

Munich Re reported net income for 2008 of EUR1.5 billion (U.S.$1.93 billion at the current exchange rate) down from 2007 netincome of EUR3.9 billion ($5.7 billion in 2007). The company saidthe 2007 results benefited from an extraordinary tax benefit ofEUR400 million ($584 million in 2007).

The Munich, Germany-based company said fourth-quarter profittotaled EUR100 million ($128.8 million current exchange rate). Thecompany did not supply fourth-quarter results for 2007.

Gross premiums written rose by 1.5 percent to EUR37.8 billion($48.7 billion current exchange rate).

The company reported its reinsurance combined ratio climbed 3.1points to 99.5, while primary insurance shaved 2.2 points off itsratio to 91.2. The increased combined ratio was attributed toincreased claims from both natural catastrophes and man-madelosses.

Munich Re took a hit on its equity exposure, reducing its equityexposure and investing in government and corporate bonds. Thecompany took "prudent" write-downs of about EUR400 million ($515million) on fixed-interest securities in the fourth quarter andabout EUR500 million ($644 million) for the year.

Two-thirds of Munich Re's property-casualty portfolio was up forrenewal on Jan. 1, amounting to a premium volume of EUR8.3 billion($10.69 billion). Prices, terms and conditions varied greatlybetween regions and lines of business, the company said, but"stable or increased prices were recorded marketwide."

"The turnaround has been achieved," said Torsten Jeworrek, amember of Munich Re's board of management. "The erosion ofreinsurance prices over the last few years has been halted. We havesucceeded in improving our portfolio through price increase forexisting business and attractive new business, but also byterminating business that was no longer profitable."

Munich Re said it did not renew close to 18 percent of itsbusiness, a volume of EUR1.5 billion ($1.93 billion). However, itwrote EUR954 million in new business ($1.23 billion). Includingrenewed and expanded business, the company said its premium volumefell 3 percent to around EUR8 billion ($10 billion). Rates improvedby 2.6 percent compared to last year, the company added.

"Certainly, not all our expectations were fulfilled," said Mr.Jeworrek. "The development of the economy as a whole, with itseffects on the insurance industry's capitalization and results, hasnot yet led to a situation in all markets where the playersrecognize the need for prices, terms and conditions that areconsistently risk-adequate. I am nevertheless satisfied with theoutcome of the renewals. We have been able to improve the qualityof our portfolio."