Munich Re posted a smaller-than-expected net loss in the first quarter as its tax bill fell in the wake of devastating earthquakes in Japan and New Zealand.

The world's biggest reinsurer had already primed the market to expect a clearly negative quarterly result, after penciling in 2.7 billion euros ($3.9 billion) for natural catastrophe insurance claims from disasters including the two earthquakes as well as flooding and a cyclone in Australia.

Despite these devastating natural catastrophes, we can still achieve a profit for the year as a whole, Chief Financial Officer Joerg Schneider said, reiterating the latest outlook.

Munich Re had ditched its full-year target of earning about 2.4 billion euros in net profit in the wake of the disasters and on Monday declined to put a figure on expected profit this year.

It would be inappropriate to set a lower target, Schneider told a conference call with journalists.

Reinsurers typically face their biggest damage claims in the second half of the year, when the North Atlantic hurricane season, which runs from June to November, is in full swing.

A worrisome series of hurricanes in 2010 veered off harmlessly into the Atlantic, leaving U.S. coastal properties, and insurers, unscathed. This year could be different.

Big damage payouts also hold a silver lining for reinsurers and their insurance company clients, because they make it easier to justify higher prices for insuring against risks.

Munich Re said the damage already sustained this year would put upward pressure on prices for natural catastrophe and industrial insurance, and that a broad increase in reinsurance prices was to be expected for the full year.

Altogether, (price rises) will probably come out in the low single-digit percentage range, said Torsten Jeworrek, Munich Re board member responsible for reinsurance business.

But I don't have a crystal ball, he added.

Jeffries analyst James Shuck said Munich Re's prediction of double-digit price increases in contract talks for U.S. natural catastrophe reinsurance in the coming weeks was encouraging.

Management made some pretty positive comments about the rating outlook especially on global lines, Schuck said in a note to clients.

Munich Re shares were down 1.4 percent to 110.45 euros at 1052 GMT, while the STOXX Europe 600 insurance index <.SXIP> was down 1.6 percent.

PAINFUL QUARTER

The freak quarter of natural disasters this year has slammed reinsurers in their bread-and-butter business of providing a financial backstop to insurance companies facing huge claims.

Munich Re's quarterly net loss was 947 million euros, which was smaller than the 1.06 billion euros average of 10 estimates in a Reuters poll of banks and brokerages.

The result was favored by a tax gain of 612 million euros in the quarter resulting from the quarterly loss. Group gross premiums also rose 11.3 percent to nearly 13 billion euros.

Global No. 2 player Swiss Re last week reported a $665 million quarterly loss, while No. 3 reinsurer Hannover Re managed to turn a surprise profit, helped by a tax rebate and the freeing up of reserves accrued to cover past claims.

The Japan, New Zealand and Australia claims also dented profits at Warren Buffett's conglomerate Berkshire Hathaway Inc, which is also a major reinsurance player.

Munich Re shares have fallen by more than 9 percent since February 21, the day before a 6.3 magnitude earthquake struck Christchurch, New Zealand, and have fallen by 4.8 percent since the magnitude 9.0 earthquake and tsunami in Japan.

Data from StarMine, which weights analysts' forecasts according to their track record, show Munich Re trading at 12.8 times 12-month forward earnings, a discount to rival Swiss Re at a multiple of 14.8 but a premium to Hannover Re , which trades at a multiple of 8.4.

(Editing by David Holmes and Mike Nesbit)

($1=.6953 euros)

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