(Bloomberg) — Munich Re, the world's biggest reinsurer, took a706 million-euro ($800 million) loss on derivatives contracts inthe first quarter, caught off guard by a rally in stockmarkets.

The majority of the losses were incurred by hedging againstgains in stocks, Chief Financial Officer Joerg Schneider said on aconference call on Thursday, when the company reported first-quarter earnings. He didn't provide further details.

Munich Re is among European reinsurance firms seeking ways toboost returns from investments after yields on European bonds fellto record lows and prices of coverage decreased. The lossescontributed to a 16% drop in first-quarter profit to 790 millioneuros, the company said.

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