* Q4 op profit down more than a third to 243 million euros
* Net up 48 pct to 265 mln after 90 mln one-off tax benefit
* Says 2014 challenging but keeps 850 mln euro profit goal
* Shares fall more than 2 percent in firm sector
(Recasts with operating result, adds details, shares, analyst
comment, changes dateline from Frankfurt)
By Jonathan Gould and Thomas Atkins
HANOVER, Germany, March 11 Germany's Hannover Re
posted a sharp drop in underlying quarterly earnings
on Tuesday after results in life and health reinsurance fell
short of its expectations, helping send its shares down more
than 2 percent.
The world's third-biggest reinsurer after Munich Re
and Swiss Re said its operating result
fell by more than a third to 243 million euros ($337.3 million)
in the fourth quarter of 2013.
In the life and health business, Hannover Re said its
results did not live up to expectations due to a substantial
strengthening of reserves for its Australian disability
business, which hit its operating result by some 100 million
An additional negative was the absence of a more than 40
million euros derivatives-related gain which had boosted the
previous year's results, the net effect being that operating
results in life and health reinsurance contracted by 46 percent
to 150.5 million euros.
Analysts at Berenberg Bank, who have a "buy" rating on the
stock, noted the reserve charge was "obviously larger than we
had anticipated", though they added that "encouragingly the
company has indicated that it does not anticipate further
reserve charges from this business in 2014".
Hannover Re shares were down 2.1 percent at 59.43 euros by
0950 GMT, making them the weakest performers in the STOXX Europe
300 index of insurer stocks, which was up slightly. The
shares are down 6 percent in the past 12 months, compared with a
23 percent gain in the index.
Reinsurers, which help insurers shoulder risks in exchange
for part of the profit, have had a buoyant few years, but are
facing one of the biggest market-wide price declines since the
late 1990s as their customers press for better deals.
A decline in the number of major natural catastrophes such
as hurricanes or earthquakes over the last two years has left
many reinsurers sitting on a thick cushion of profit that has
prompted their customers to press for cheaper premiums.
That price pressure has been compounded by competition from
pension funds, which have poured into investment vehicles that
offer reinsurance in direct competition with traditional
Hannover Re's net profit rose 48 percent to 265 million
euros ($368 million) in the quarter, beating expectations due to
a 90 million euro one-off effect resulting from the release of
provisions for deferred taxes.
The company said it would pay a dividend of 3 euros per
share, the same as for 2012 if the standard dividend of 2.60
euros and the special dividend of 0.40 euro are combined.
With the payout, Hannover Re joins its larger peers in
returning cash to shareholders through higher payouts or share
Hannover Re had been expected to report a fourth-quarter net
profit of 213 million euros and a dividend of 2.85 euros,
according to the average of 13 estimates in a Reuters poll of
banks and brokerages.
Annual profit rose to a record 895.5 million euros.
"In view of the prolonged period of low interest rates and
increasing competition, especially in non-life reinsurance, the
general environment remains challenging", Chief Executive
Officer Ulrich Wallin said in a statement, though the company
repeated a 2014 target to earn 850 million euros and pay out up
to 40 percent of profit to shareholders.
($1 = 0.7205 Euros)
(Editing by Tom Pfeiffer and David Holmes)