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Hannover Re Quarterly Net Falls 40% After Tax Gain Not Repeated

Hannover Re, the world’s fourth-biggest reinsurer, said third-quarter profit fell 40 percent after it didn’t repeat a year-earlier tax gain.

Net income dropped to 163.2 million euros ($225.6 million) from 271.4 million euros a year earlier, the Hanover, Germany-based company said in a statement today. That beat the 131.6 million-euro average estimate of five analysts surveyed by Bloomberg.

Chief Executive Officer Ulrich Wallin said today that full-year profit will total at least 500 million euros from 748.9 million euros in 2010. Earnings this year are expected to benefit from a tax gain of about 124 million euros, the reinsurer has said. The profit target depends on second-half catastrophe losses not significantly exceeding a 295 million-euro major claim forecast, Hannover Re has said.

“Although a number of major losses were again recorded in the third quarter, these were comparatively slight in terms of their loss amount,” Wallin said in the statement. “The major loss expenditure” for the three-month period “came in below our expected level,” he said.

The reinsurer said today that it aims to pay a dividend for 2011 that “could even exceed 40 percent of group net income.” Hannover Re raised its 2010 dividend by 10 percent to 2.30 euros a share following a 112 million-euro tax gain. Analysts expect the reinsurer to cut this year’s payout to 1.80 euros, according to data compiled by Bloomberg.

Tax Provisions

A decision by the German Federal Fiscal Court allowed the reinsurer to release tax provisions set aside for a subsidiary in Ireland, boosting net income in the third quarter last year, the company said in October 2010.

Reinsurers, and the primary carriers whom they help carry risks for clients, incurred record losses of about $70 billion from the natural disasters in the first half of the year, according to estimates by Guy Carpenter & Co., the reinsurance broker of Marsh & McLennan Cos. Catastrophe claims usually increase in the second half of the year with the hurricane season in the North Atlantic and typhoons in the Pacific.

This year’s Atlantic hurricane season only saw one major storm hit the U.S. coast. Hurricane Irene struck North Carolina on Aug. 27 then headed north along the East Coast. The storm may cost the insurers between $3 billion and $6 billion in the U.S., according to an estimate from risk-modeling firm AIR Worldwide.

Swiss Re Ltd., the world’s second-biggest reinsurer, said last week that third-quarter profit more than doubled to $1.35 billion, beating the $539 million average analyst estimate. Earnings were boosted by $354 million in investment gains, mainly from government bonds, the Zurich-based company said.

Munich Re, the world’s No. 1 reinsurer, yesterday posted a bigger-than-estimated 63 percent decline in third-quarter net income as currency effects weighed on earnings.

Hannover Re shares have lost 8.5 percent this year, compared with a 12 percent decline in the Bloomberg Europe 500 Insurance Index. The company, which is 50.2 percent owned by German insurer Talanx AG, has a market value of about 4.43 billion euros.

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