(Corrects dividend to 8.60 from 8.61)
* Proposes 2016 div of 8.60 eur/shr vs poll avg 8.51 eur
* 2016 net profit around 2.6 bln euros vs poll avg 2.7 bln
* Says January renewals showed price decline slowing
* Shares indicated at bottom of DAX index
LONDON, Feb 7 (Reuters) - German reinsurer Munich Re reported net profit for 2016 below expectations after large losses from natural catastrophes in the fourth quarter, sending its shares to the bottom of Germany's DAX index in pre-market trading.
The world's largest reinsurer said on Tuesday preliminary net profit for 2016 was around 2.6 billion euros ($2.8 billion), down 16 percent from a year earlier and below the consensus for 2.7 billion in a company-compiled forecast.
Major claims from natural catastrophes were high in the fourth quarter, with costs of 232 million euros for Hurricane Matthew, which hit the United States and Caribbean and 251 million euros for an earthquake in New Zealand.
But Munich Re said in a statement it had met its profit target of "well over 2.3 billion euros", and it raised its dividend for 2016 by more than 4 percent to an above-forecast 8.60 euros per share.
Chief Financial Officer Joerg Schneider the company's strong market position, and successful investment management meant Munich Re was "largely able to counter the effects of low interest rates and intense competition in the reinsurance markets".
Munich Re and rivals such as Swiss Re and Hannover Re have been battling several years of falling reinsurance prices, along with low interest rates, which cut the value of their investments.
Hannover Re on Tuesday reported a net profit of 1.17 billion euros for 2016, beating its own target.
The January renewals season for reinsurance was "once again challenging", Torsten Jeworrek, a member of Munich Re's board of management, said in a statement, although he added that price reductions had continued to slow.
The insurer withdrew from markets that no longer met profit expectations, such as China, Jeworrek added.
Munich Re shares fell 1.1 percent to the bottom of Germany's blue chip DAX index in pre-market trade at brokerage Lang & Schwarz.
DZ Bank analysts retained their "hold" rating on the stock, but said that the raised dividend was "a sign of confidence in the balance sheet and future earnings power".
$1 = 0.9349 euros Reporting by Carolyn Cohn; Editing by Maria Sheahan