May 7 (Bloomberg) -- Hannover Re, the world’s third-biggest reinsurer, reported that first-quarter profit was little changed as rates charged by the industry remain under pressure.
Net income rose to 233 million euros ($324 million) from 231 million euros a year ago, the Hanover, Germany-based reinsurer said in a statement today. That compares with the 217 million-euro average estimate of nine analysts surveyed by Bloomberg.
Reinsurers, who help primary insurers shoulder risks, are facing pressure on their earnings as reinsurance rates decline for a second year in a row amid lower-than-average disaster claims and an influx of competition.
Prices may fall further this year and next unless “either a major catastrophe absorbs a lot of the industry’s excess capital or when underwriting earnings turn into losses,” Hannover Re Chief Executive Officer Ulrich Wallin said in an interview on April 8.
Hannover Re, which confirmed a full-year profit target of about 850 million euros, said the quarter’s major losses remained below average, the same as in the year-earlier period. The reinsurer’s only major loss resulted from the missing Malaysian passenger plane, for which Hannover Re set aside reserves of 30.6 million euros. At the same time, “non-life reinsurance continues to be fiercely competitive,” it said.
The increasing supply of capital brought rates for property-catastrophe policies down 11 percent in January, while prices also fell for most other types of coverage, according to Guy Carpenter, the reinsurance broker of Marsh & McLennan Cos. Prices continued to fall in the April renewals, broker Willis Re said last month. Reinsurer capital reached a record $540 billion at the end of last year, according to a report by Aon Benfield, the reinsurance broker of Aon Plc.
Hannover Re shares, which value the company at about 8 billion euros, advanced 7 percent this year, compared with an unchanged Bloomberg Europe 500 Insurance Index.
Talanx AG, Germany’s third-biggest insurer, owns 50.2 percent of Hannover Re.
Munich Re, the world’s biggest reinsurer, reported last week that first-quarter profit declined 7 percent to about 900 million euros.
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