Hannover Re announced strong earnings and healthy investment returns that prompted the German reinsurer to boost full-year forecasts and provided a platform to withstand any financial hit from Hurricane Sandy.
Days after the storm hit New York, Hannover Re said it was too early to make reliable assessments of Sandy’s likely financial impact but Roland Vogel, chief financial officer, said he did not see that the group’s budget for natural disasters was “in danger” given damage estimates so far.
Catastrophe models have suggested Sandy could cost the insurance industry up to $20bn, although estimates vary considerably. Shares in Hannover Re rose more than 6 per cent in Frankfurt on Tuesday.
Hannover Re improved its outlook for this year, saying it would grow by between 8 per cent and 9 per cent compared with the 5 per cent to 7 per cent range previously indicated. Reinsurance rates – the price negotiated at annual intervals between insurers and reinsurers – were adequate at recent renewals while demand should remain strong, the group said.
Operating profits more than doubled to €766m. Earnings were boosted by a relatively benign impact from catastrophes in the first nine months of the year, with the cost of “major losses” falling from €743m last year to €193m.
Returns from the group’s investment portfolio were also better than expected, at 4.3 per cent compared with a target of 3.5 per cent. Returns from insurers’ investments have been under pressure because of low yields from many assets, causing unease in the industry and among regulators about risks to companies’ financial health if low returns persist.
Net income for the first nine months rose more than 75 per cent to €670.8m, earned from gross premiums of €10.3bn compared with €9.1bn in the same period last year. The rise in profits “puts in place a good platform for achieving a very pleasing result for the full 2012 financial year,” said Ulrich Wallin, chief executive. “Group net income in excess of €800m is realistic.”
Hannover Re also said net income could also exceed €800m next year. In 2011 net income was €606m.
Hannover Re is the third-largest reinsurer in Europe behind Munich Re and Swiss Re, which are also due to report earnings this week. The group is majority-owned by Talanx, which madean initial public offering last month after more than a decade of on-off preparation.
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