The situation in the capital markets in the first quarter led to writedowns on securities and losses on the disposal of investments totaling 2.3 billion euros ($2.7 billion), Munich Re said.

Premium income rose by 0.8 percent to 10.8 billion euros ($12.7 billion) during the first quarter 2003 from 10.7 billion euros ($12.5 billion) for the same period in 2002.

The strong euro had the effect of substantially reducing the euro value of premium written in other currencies, especially the dollar, Munich Re explained, noting that premium rose by 6.8 percent if the effects of currency translations are excluded as well as the effects of new acquisitions.

The company indicated that improved results in its reinsurance and primary operations had softened the effects of the "enormous burden" of problems in the capital markets.

Underwriting policy in reinsurance succeeded in bringing the combined ratio down to 96.8, compared to 101.7 in the first quarter of 2002, the company said. Munich Re's primary insurance group reported a combined ratio of 98 for the first quarter of 2003, compared with 110.2 for the first quarter last year.

"We are making good progress, despite the uncertainties regarding capital market trends," said Hans-J?rgen Schinzler, chairman of the board of management for Munich Re.

Mr. Schinzler's statement continued, "Provided we are spared exceptional loss events, the advances we have made in operative business will have a noticeable impact on our overall result for 2003."

"Despite the loss, the wind has clearly changed," said Jorg Schneider, board member of Munich Re. "The first three months show that, notwithstanding the after-effects of the weak capital markets, we have put our business on a sound footing again."