Hannover Re swings to 3Q loss of 395 million euros

FRANKFURT, Germany - Reinsurer Hannover Re AG reported Wednesday it swung to a third quarter net loss — its first since 2005 — blaming higher claims from weather-related disasters and the financial crisis that caused it to write down investments. It also reiterated it would abandon its outlook for the rest of the year.

The Hannover-based company said it lost 395 million euros ($510 million) in the July-September period compared with a profit of 284.3 million euros a year earlier.

Gross premiums in the third quarter rose 1.4 percent to nearly 2 billion euros ($2.6 billion) compared with 1.9 billion euros in 2007.

Reinsurers sell backup coverage to other insurers, spreading risk so the system can handle large or widespread losses.

The company blamed its loss on higher third quarter claims from various storms, including Hurricanes Ike and Gustav which cost it 250 million euros ($318.2 million), along with the uncertainty that has plagued financial markets worldwide.

It wrote down some 200 million euros ($254.5 million) on investments and "unrealized losses" in the quarter, bringing its total write-downs from January to September to 466 million euros ($601 million).

Its pretax earnings also slid to a loss of 368 million ($475 million) in the quarter compared with a profit of 211 million euros a year earlier.

For the nine-month period, the company said its gross premiums also contracted by 5 percent to 6.1 billion euros ($7.9 billion) from 6.4 billion euros a year earlier.

"The crisis on international capital markets intensified in the third quarter on a previously undreamt-of scale," Chief Executive Wilhelm Zeller said in a statement.

"Difficulties at high-profile banks caused confidence in the financial markets to plummet; the markets were also rocked by the steps that had to be taken to rescue the largest insurance group (AIG) in the U.S.," he said.

"The relief packages assembled by governments in the major industrialized nations to restore lost confidence have hitherto enjoyed only limited success."

Because of that, the world's fourth-biggest reinsurer said it did not plan a dividend payment this year.

"While its core business developed in line with expectations, and despite its conservative investment strategy, Hannover Re again had to take significant write-downs — particularly on equity holdings," Luis Maglanoc, an analyst at UniCredit, wrote in a note to clients.

But he said the reinsurer's long-term financial strength remained "robust despite the significant drop in profits. Moreover, the company expects good prospects in the reinsurance business for 2009."

Shares of Hannover Re fell 5.5 percent to close at 19.57 ($25.40) in Frankfurt.

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