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Hannover Re Quarterly Profit Falls on Cat Losses

Posted on 04 May 10

Hannover Re, Germany’s second-biggest reinsurer, said first-quarter profit fell 31 percent on higher claims from natural disasters including the earthquake in Chile and western Europe’s winter storm Xynthia.

Net income dropped to 157.2 million euros ($207 million) from 228.6 million euros a year earlier, the Hanover-based company said in an e-mailed statement today. The earnings exceeded the 88 million-euro median estimate of nine analysts surveyed by Bloomberg.

“Hannover Re’s first quarter marks a good start into the year, despite the above-budget nat cat claims that already consumed more than half of this year’s budget,” Bernd Mueller- Gerberding, a Munich-based UniCredit SpA analyst who recommends buying the shares, wrote in a note to clients today. “However, the positive surprise was helped by a positive run-off result from previous years.”

First-quarter earnings were boosted as the reinsurer was able to release some funds it had set aside for claims from previous catastrophes, which didn’t turn out to be as costly as expected, Chief Financial Officer Roland Vogel said on a conference call today.

The shares rose 15.5 cents, or 0.4 percent, to 35.525 euros in Frankfurt, bringing this year’s gain to 8.6 percent. That compares with today’s 1.2 percent drop in Munich Re, the world’s biggest reinsurer, and values Hannover Re, of which German insurer Talanx AG owns 50.2 percent, at about 4.3 billion euros.

Full-Year Outlook

Hannover Re reiterated its full-year outlook for a return on equity of at least 15 percent, or profit of about 600 million euros, following a number of major catastrophe losses including the ruptured deep-water well that is spewing thousands of barrels a day of crude oil into the Gulf of Mexico.

“Although the burden of major losses in this quarter was higher than our expected level, the achieved result puts in place a good platform for attaining our 2010 profit target,” Chief Executive Officer Ulrich Wallin said.

The reinsurer’s investment income advanced 41 percent to 279.5 million euros, a return on investments of 3.6 percent.

“Key factors here were the growth in the volume of assets under our own management to 23.7 billion euros, lower write-downs and a further reduction of credit spreads for corporate bonds on the back of more stable markets,” the reinsurer said.