August 13, 2018 / 6:03 AM / 6 days ago

Talanx warns profit aim could be at risk due to U.S. life treaties

BERLIN, Aug 13 (Reuters) - Talanx warned that its full-year target for 850 million euros ($968 million) in net profit could become more difficult to reach if its earnings take a major hit from problems at its U.S. life reinsurance business.

It said it had hiked reinsurance rates in the second quarter for a block of U.S. mortality treaties that had performed very poorly, which gives the affected clients the right to take back, or recapture, risks ceded to Talanx.

“At present, since the reporting date, we have already been advised of contract recaptures that will lead to a pre-tax burden of $264 million,” it said, adding that that amount could rise to a maximum total of $500 to $600 million over the second half of the year.

In the long run, however, the recaptures will have a positive effect on its earnings as they will allow it to avoid future losses that would have occurred without raising premiums, it said. ($1 = 0.8784 euros) (Reporting by Maria Sheahan Editing by Douglas Busvine)

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