TAKING THE PULSE: German insurers and reinsurers will report
solid profits for the third quarter, benefiting from a mild
hurricane season and improved capital markets, which should also be
reflected in stronger balance sheets.
Swiss peer Swiss Reinsurance Co. (RUKN.VX) set the tone for the
sector Tuesday when it reported a swing to a third-quarter net
profit on cost-cutting, low catastrophe claims and generally
improved reinsurance markets.
The sector benefited from low costs for large-disaster claims in
the three months July through September that were limited to small
damage caused by hailstorms in Central Europe and Canada, an
industrial fire claim in Russia and a flood in the Philippines.
Around this time last year, insurers and reinsurers were heavily
hit by large sums they had to pay for claims caused by Hurricanes
Gustav and notably Hurricane Ike, which - in combination with the
widening financial crisis - caused several companies to warn on
profits. Ike alone caused an estimated market loss of between $15
billion and $20 billion for the entire sector, according to a
Hannover Re AG (HNR1.XE) estimate based on publicly available
information.
COMPANIES TO WATCH:
*Munich Re (MUV2.XE) -- (Nov. 5)
MARKET EXPECTATIONS: Munich Re, one of the two largest
reinsurers worldwide by premium income, is expected to swing to a
net profit of EUR727 million from a net loss of EUR3 million a year
earlier according to an average forecast in a Dow Jones Newswires
poll of 12 analysts.
Analysts on average predict an 11% improvement in premium income
to EUR10.3 billion. Property-casualty premiums are benefiting from
the acquisition of engineering insurance specialist Hartford Steam
Boiler Inspection and Insurance Co., and life-health reinsurance
premiums from nine large five-year life reinsurance contracts
signed earlier this year.
As a result of moderate claims, the non-life combined ratio is
expected to improve to 97.0%, which is Munich Re's target, from
101.2%. A figure below 100% means the insurer's underwriting
business has been profitable. The strong recovery in both stock and
bond markets will contribute to lift shareholders' equity and the
investment result, which is expected to triple to EUR1.99 billion
from EUR662 million.
On the downside, Munich Re's primary insurer Ergo
Versicherungsgruppe AG (EVG2.XE) will likely reflect depressed
margins due to low investment returns and weak new business, as the
still sluggish economy limits what people set aside less for
insurance and retirement products.
MAIN FOCUS: Update eyed on recently resumed share buybacks and
expectations for 2010 contract renewals after industry meetings in
Monte Carlo and Baden-Baden. Outlook watched on full-year targets,
plans for dividend and prospects for Ergo.
*Hannover Re (HNR1.XE) -- (Nov. 6)
MARKET EXPECTATIONS: Hannover RE, one of the world's five
largest reinsurers worldwide, is forecast to report a quarterly net
profit of EUR151 million, according to a Dow Jones Newswires poll
of 14 analysts. The figure would mark a substantial improvement
from a EUR395 million loss in the year-ago quarter when Hannover Re
also announced it wouldn't pay a dividend for 2008.
Investment result is forecast at EUR281 million compared with an
investment loss of EUR75 million in the third quarter of 2008. The
combined ratio is seen improving to 97.7% from 114.2%.
Premium income is expected to have gained 25% to EUR2.46 billion
from EUR1.96 billion a year earlier, benefiting from the
contribution of the U.S. individual life reinsurance portfolio that
Hannover Re bought from Bermuda-based reinsurer Scottish Re Group
Ltd. (SKRRF) in the first quarter.
MAIN FOCUS: Update awaited on full-year targets, whether there's
room to lift the company guidance, shareholders' equity.
*Allianz SE (ALV.XE) -- (Nov. 9)
MARKET EXPECTATIONS: Allianz SE, Europe's largest primary
insurer by market capitalization, is expected to report substantial
improvements in third-quarter net and operating profits compared
with a year earlier, when loss-making Dresdner Bank, the financial
crisis and weak capital markets were a drag on earnings.
Analysts from DZ Bank and UniCredit expect quarterly net profit
in an area of EUR1.27 billion and EUR1.29 billion, while a
Cheuvreux analyst expects EUR1.48 billion. Main drivers are the
realization of capital gains, for instance from Allianz's reduction
in the Commerzbank AG (CBK.XE) stake to 10.1% from 13.8% and from
marking to market some Hartford Financial Services Group Inc. (HIG)
warrants held in the trading book, Cheuvreux analyst Michael Haid
writes.
All figures would reflect a substantial improvement from EUR545
million net profit from continuing operations the insurer posted in
the same quarter a year ago. It is also significantly better than
the EUR2.2 billion net loss that Allianz posted a year earlier when
adding in the loss contribution from Dresdner Bank, which it still
owned. The sale of Dresdner Bank to Commerzbank was closed in the
first quarter.
Operating profit, forecast at EUR1.85 billion to EUR1.88
billion, is also above the year-ago figure of EUR1.56 billion,
helped by strong contributions from life/health insurance and
financial services that are more than offsetting the lower
contribution from the property/casualty business.
Life/health insurance and asset management business will also
have benefited from spread narrowing of corporate bonds and rising
stock markets, analysts said.
For better comparison of the operating performance trend,
several analysts preferred to liken the third-quarter figures to
the second quarter, when Allianz posted a net profit of EUR1.87
billion and operating profit EUR1.79 billion
MAIN FOCUS: Investors are eyeing an update on clear full-year
goals, which Allianz has yet to issue, capital position and
solvency ratio. Allianz recently announced the delisting of its
shares from the New York Stock Exchange (NYX), effective Oct. 23,
and other European stock exchanges in a move to reduce reporting
complexities.
Company Web sites: www.munichre.com;
www.hannover-re.comwww.allianz.com;
-By Ulrike Dauer, Dow Jones Newswires; +49 69 29725 500;
ulrike.dauer@dowjones.com
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