* 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
* CFO says room for further share buyback, decision by March
* CFO says not looking for large acquisitions
* Shares trading at bottom of DAX index (Adds buyback, M&A, 2017 profit comment, updates shares)
By Carolyn Cohn
LONDON, Feb 7 (Reuters) - German reinsurer Munich Re reported net profit for 2016 below expectations on Tuesday after large losses from natural catastrophes in the fourth quarter, sending its shares to the bottom of Germany's DAX index.
The world's largest reinsurer held out the prospect of a further share buyback, however, continuing a trend of recent years as reinsurers struggle to put money to work against a backdrop of declining prices.
"We still have wiggle room for another share buyback on top of the dividend," Chief Financial Officer Joerg Schneider told a media call, adding a decision would be made by March.
Munich Re launched share buyback programmes totalling 1 billion euros ($1.07 billion) in 2015 and 2016.
Schneider said its insurance arm Ergo could expand outside Germany through acquisitions, but that Munich Re was not looking to make any large purchases.
Competition in insurance and reinsurance and a few large mergers in recent years have fuelled speculation of further deals.
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.
But Munich Re said 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.
Schneider said 2017 profit may be a little lower than 2016.
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.
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.
Munich Re shares fell 1.9 percent to the bottom of Germany's blue chip DAX index at 0948 GMT.
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 $1 = 0.9376 euros Additional reporting by Alexander Hübner in Frankfurt; Editing by Maria Sheahan and Louise Heavens