March 7 (Bloomberg) -- Hannover Re, the world’s fourth-largest reinsurer, proposed a record dividend after profit rose to the highest in the company’s history as revenue grew and claims from natural disasters declined.
Net income rose 42 percent to 858 million euros ($1.16 billion) from a year earlier, the Hanover, Germany-based company said in a statement today. That beat the 831.5 million-euro average estimate of 31 analysts surveyed by Bloomberg. Hannover Re will pay a dividend of 2.60 euros a share plus a bonus of 0.40 euros a share, compared with 2.10 euros last year.
Hannover Re had announced a profit goal of about 800 million euros. Earnings increased after a market rally in the second half of 2012, which boosted investment income, and a halving in losses from natural disasters such as hurricanes and droughts.
“We were able to push through price increases for most business segments,” Chief Executive Officer Ulrich Wallin said in the statement. “The rate level for our company in 2012 was significantly better than in the previous year.”
Hannover Re, majority-owned by insurer Talanx AG, rose 2.6 percent to 62.81 in Frankfurt trading. The shares climbed 6.5 percent since the start of the year, giving the firm a market value of 7.57 billion euros. The advance compared with gains of 3.6 percent for the Stoxx Insurance 600 Index.
Investment income rose to 1.7 billion euros from 1.4 billion euros a year earlier. The company said return on investment was 4.3 percent, beating a target of 3.5 percent even as interest rates fell. The goal for 2013 is 3.4 percent, which Wallin called “challenging” during the press conference.
The reinsurer’s fourth-quarter net income declined to 187.5 million euros from 224.3 million euros a year before, beating the 162 million-euro estimate of analysts surveyed by Bloomberg.
Hannover Re said major insurance losses more than halved to 477.8 million euros last year, with costs from Hurricane Sandy of a net 257.5 million euros being the biggest. The total cost for the industry of Hurricane Sandy was more than $20 billion. The cost of the wreck of the Costa Concordia cruise ship cost Hannover Re 53.3 million euros, it said.
The reinsurer expects a “good year” in 2013 and is “optimistic” for the April renewal round as the segments which renew their contracts next month are mainly those “with damages last year, which supports prices,” Wallin said.
The company reiterated a forecast of gross written premium growth of about 5 percent this year. Premium growth in the non-life business is expected at 3 percent to 5 percent, while life and health reinsurance premiums will probably grow between 5 percent and 7 percent, it said. A profit of “around” 800 million euros is possible for 2013, Wallin said.
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