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UPDATE 2-Crisis helps Hannover Re 2009 outlook, shares jump

Published 02/03/2009, 10:52 AM
Updated 02/03/2009, 10:56 AM
SRENH
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* Hannover Re sees 15-20 percent ROE in 2009

* ROE figure equates to almost 700 million euros net profit

* Downward reinsurance price spiral halted, many price gains

* Shares rise as much as 16 percent

(Adds detail, CEO, analyst comment)

By Jonathan Gould

FRANKFURT, Feb 3 (Reuters) - Hannover Re on Tuesday predicted a return on equity of up to 20 percent in 2009 as the financial crisis boosts demand and prices for reinsurance risk cover, sending the company's shares up sharply.

"We expect return on equity of 15-20 percent," Chief Executive Wilhelm Zeller said, adding this corresponded to net profit of almost 700 million euros ($900 million), including the purchase of a life reinsurance portfolio unveiled last month.

That result, if achieved, would be close to matching Hannover Re's best-ever net profit of 734 million euros achieved in 2007, signalling a rapid rebound from what it described as a "lost year" in 2008. It will publish 2008 results on March 11. "Our company has weathered the storm on financial markets," Zeller said.

Hannover Re's share price jumped by as much as 16 percent and was trading up 13 percent at 27.00 euros by 1504 GMT, outpacing a 1 percent rise in the DJ Stoxx European insurance index.

Traders said they were positively surprised by Hannover Re's earnings outlook for 2009.

"Gross premiums of the group are expected to increase by 16 percent including the effect from the ING Life Re portfolio acquisition," said DZ Bank analyst Thorsten Wenzel, adding his brokerage will review its "sell" rating on the stock.

According to StarMine, which weights analysts' forecasts according to their track record, Hannover Re trades at 6 times 12-month forward earnings, a premium to Swiss Re's multiple of 4, but less than Munich Re's 7.5.

Shares in Munich Re, the world's biggest reinsurer that is due to release key financial results and details of its January reinsurance renewals on Wednesday, also rose 4.6 percent.

CLEAN START

While the financial crisis has hit investment income in the insurance industry, it has indirectly helped reinsurers like Hannover Re, Munich Re and Swiss Re by raising demand for risk cover from their insurance company clients.

Hannover Re, the world's fourth-biggest reinsurer, said the downward trend in reinsurance prices had been halted in negotiations over new contracts that started in January.

"We are making a clean start to 2009," Zeller said, adding that the company aimed to continue its policy of paying out 35-40 percent of net profit as a dividend for 2009.

The company obtained premium increases in many markets and even double-digit percentage growth in some catastrophe business as well as credit and surety reinsurance.

"Rate increases in worldwide catastrophe business were attainable," the company said in a statement.

"However, prices were only partly risk-adequate. As a consequence, Hannover Re slightly reduced its business."

The German market is proving attractive, with the company obtaining price increases of up to 20 percent for some motor insurance coverage, it said. (Editing by David Cowell)

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