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Hannover Re Profit Rises 29 Percent, Beating Estimates

Aug. 7 (Bloomberg) -- Hannover Re, the world’s fourth-biggest reinsurer, said second-quarter profit rose 29 percent, beating analysts’ estimates, helped by higher investment income.

Net income advanced to 186.3 million euros ($248 million) from 144 million euros a year ago, the Hanover, Germany-based company said in a statement today. That compared with a 173.4 million-euro average estimate of nine analysts surveyed by Bloomberg.

Hannover Re, led by Chief Executive Officer Ulrich Wallin, confirmed its full-year profit forecast of about 800 million euros after floods in Germany, Austria and the Czech Republic resulted in net claims of 136.9 million euros, the second quarter’s largest single event. The reinsurer said in June that costs for the floods probably won’t exceed its budget for major disaster claims.

The shares rose 2.3 percent to 57.82 euros at 9:45 a.m. in Frankfurt. They lost 1.9 percent this year, compared with the 17 percent gain for the Bloomberg Europe 500 Insurance Index. German insurer Talanx AG, which sold shares in an initial public offering last year, owns 50.2 percent of Hannover Re.

The disasters that so far occurred in the third quarter, including a hailstorm that hit parts of Germany at the end of July, won’t exceed the estimated expenditure on major losses for the period, Hannover Re said in the quarterly report on its website.

Claims Budget

The company’s annual budget of 625 million euros for major claims compares to an actual claims figure of 259.5 million euros for the first half of the year.

Reinsurers’ catastrophe claims usually increase in the second half of the year with the hurricane season in the North Atlantic and typhoons in the northwest Pacific. The June-through-November U.S. hurricane season didn’t result in major claims so far this year.

Net investment income rose 24 percent to 334.3 million euros in the quarter from a year earlier after the year-earlier result was burdened by losses on instruments used to hedge against inflation and credit risk associated with some securities deposits held by U.S. life-insurance clients.

Munich Re, the world’s biggest reinsurer, yesterday missed analyst estimates with a 35 percent decline in second-quarter profit, as claims from natural disasters rose. The Munich-based company said it expects costs of about 230 million euros from the June floods in central Europe. It kept its full-year earnings target of “close to” 3 billion euros.

Below Average

Reinsurers, which help primary insurers such as Allianz SE and Axa SA shoulder risks in return for a share of premiums, face challenges from low interest rates and an abundant supply of capital. Even with the recent European flooding, catastrophe claims remain below average, weighing on demand for reinsurance coverage.

While flooding in May and June was “by far” the most expensive natural catastrophe in the first half, resulting in insured losses of more than 3 billion euros, the industry’s total insured losses in the period of about $13 billion remained below the 10-year average of $22 billion, according to estimates by Munich Re published last month.

To contact the reporter on this story: Oliver Suess in Munich at osuess@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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