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* Q4 net profit 0.48 bln eur vs poll 0.43 bln
* Q4 operating profit 1.6 bln vs poll 0.87 bln
* Storm Sandy cost reinsurer 800 mln eur
* Shares rise 1.8 percent, outpace insurance index (Adds analyst comment, detail, background, shares)
FRANKFURT, Feb 5 (Reuters) - Munich Re, the world's biggest reinsurer, raised its dividend more than expected after below-average damage claims and surging investment income bolstered 2012 profit.
The company said on Tuesday it planned to raise its dividend for 2012 to 7 euros per share from 6.25 euros, exceeding consensus for 6.76 euros.
"That Munich Re increases the dividend even more than we had expected is clearly a sign of confidence in the capital base and future earnings power," said DZ Bank analyst Thorsten Wenzel in a research note.
Munich Re's share rose 1.8 percent to 136.05 euros by 0821 GMT, outpacing a 0.3 percent rise in the STOXX Europe 600 insurance index.
"Our core business in insurance and reinsurance is healthy, while the claims burden from major losses was slightly below average," Chief Financial Officer Joerg Schneider said in a statement.
Natural catastrophe losses totalled about 1.3 billion euros ($1.76 billion) for the full year. Superstorm Sandy in the United States alone cost it around 800 million euros.
Net profit for 2012 rose to 3.2 billion euros from 0.7 billion euros in 2011, when major losses such as an earthquake in Japan hit results, beating the 3.13 billion euro average of seven estimates in a Reuters poll.
Investment income rose by one fourth to 8.4 billion euros, well above the average expectation of 8.1 billion in the poll.
Munich Re made no mention of intensifying competition among reinsurers to win business from insurance companies, saying that demand for reinsurance cover was relatively constant and supply was sufficient.
Munich Re rival and the world's third-largest reinsurer, Hannover Re, said on Monday pressure was mounting from competitors amid decisions by insurance companies to keep more risk on their own books, rather than passing it to reinsurers.
"In general, it has been more competitive also with the incumbent reinsurers than it was a year ago," Hannover Re Chief Executive Ulrich Wallin said of the negotiations on reinsurance contracts that were renewed in January, adding that this could make further premium growth more difficult.
Munich Re said the volume of its property-casualty reinsurance business decreased by 1.5 percent when it renewed contracts with its customers at the start of the year.
Prices, however, rose marginally by 0.5 percent, it said.
"Munich Re expects the trend towards largely stable prices, terms and conditions to continue, unless there are any exceptional loss events," the company said of contract renewals due in Asia and the Americas in the coming months.
$1 = 0.7376 euros Reporting by Jonathan Gould; Editing by Maria Sheahan and David Cowell