May 7, 2013 / 6:46 AM / in 5 years

WRAPUP 1-Low damage claims aid German reinsurer earnings

* Munich Re beats forecasts with Q1 net profit

* Hannover Re also ahead of forecast average

* Q1 damage claims lower than low year-earlier quarter

* Munich Re shares indicated up 0.5 pct

* Hannover Re shares indicated up 1.3 pct

By Jonathan Gould

FRANKFURT, May 7 (Reuters) - Low damage claims and rising premiums helped shield earnings at German reinsurers Munich Re and Hannover Re in the first quarter, as the sector battles to shore up income against a backdrop of record low interest rates.

Munich Re, the world’s biggest reinsurer, reported net profit of 972 million euros ($1.3 billion), up a fourth from the previous year’s quarter and above the average forecast of 931 million euros in a Reuters poll of analysts.

“There happened to be lower claims burdens from major losses, but the group’s operating earnings also proved to be robust,” Chief Financial Officer Joerg Schneider said on Tuesday.

“After this good start, we are optimistic about achieving our profit target for the year of close to 3 billion euros,” he added.

However, Munich Re said investment income fell 11 percent from the prior year quarter, due to declining interest income and slower growth in investments for unit-linked insurance.

The insurance sector is facing an increasingly tough battle to make up for falling income from its vast holdings of relatively safe government bonds, where yields have slumped because of rock-bottom central bank interest rates.

The European Central Bank (ECB) cut borrowing costs to a record low last week and held out the possibility of further easing to support the recession-hit euro zone economy.

World No. 3 player Hannover Re said its net profit fell by less than expected in the first three months of the year, with payouts for damage claims tumbling to 13 million euros from 61 million in the year-earlier quarter.

“Investments developed satisfactorily despite the protracted period of low interest rates,” it said.

Hannover’s quarterly net profit fell to 221 million euros from 261 million in the year-earlier quarter, but was above the 211 million euro average forecast in a Reuters poll.

Hannover Re Chief Financial Officer Roland Vogel told a conference call with journalists that the quarterly result formed a good basis for reaching the reinsurer’s full-year target of net profit in the order of 800 million euros.

The reinsurer had seen no large damage claims so far in the second quarter, he added.

Also on Tuesday, Europe’s biggest insurer Allianz posted a 20 percent rise in first-quarter operating profit to 2.8 billion euros and said it was on track to meet its full-year target.

$1 = 0.7659 euros Editing by Mark Potter

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