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Hannover Re's Fourth Quarter Beats Analysts' Estimate

Posted on 11 Mar 2009

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Germany's second-biggest reinsurer, Hannover Re, said rates have improved this year after its fourth-quarter profit beat analysts' estimate for a loss.

Profit dropped to 15.8 million euros ($20 million) from 144 million euros a year earlier, the Hanover, Germany-based company said in a statement today. That beat the median estimate for a 2 million-euro loss of 12 analysts surveyed by Bloomberg.

Hannover Re, led by Chief Executive Officer Wilhelm Zeller, reported its first ever full-year loss after record 2007 profit. While the company, 50.2 percent owned by Talanx AG, scrapped its 2008 dividend in November after impairments on equity investments and high catastrophe claims, it expects rising reinsurance rates to boost earnings this year.

“2008 was a lost year for our company,” Zeller said. “Now that the negative repercussions are behind us, we can profit from the positive effects.”

Fourth-quarter profit after minorities benefited “after a loss of 10.9 million euros was attributed to minority shareholder E+S Rueck,” Hannover Re’s German unit, spokesman Stefan Schulz said.

Spending on claims and other costs at the property and casualty reinsurance unit improved to 73.6 cents of each euro in premiums collected in the fourth quarter, helped by reserve releases. Combined ration improved to 95.4 percent for the full year from 99.7 percent in 2007, the reinsurer said.

Zeller, 64, who will retire at the end of June to be succeeded by management board member Ulrich Wallin, reiterated a target for earnings per share of 4.75 euros to 5.25 euros this year. That includes a 20 cents a share contribution from a portfolio of U.S. life-reinsurance policies written by ING Groep NV that Hannover Re acquired in January. It excludes a one-off gain from the ING portfolio acquisition of about 70 cents to 80 cents a share, Zeller added.

The reinsurer isn’t working on takeover projects as it has to “digest” the ING acquisition first, Zeller said, adding that the first quarter was “rather uneventful so far.”

The company’s solvency ratio, a measure of its ability to absorb losses, is 231 percent and he “doesn’t currently see any problems” with its capitalization.