EARNINGS PREVIEW: German Insurers To Post Solid 3Q Profits
November 05 2010 - 10:50AM
Dow Jones News
TAKING THE PULSE: German reinsurers and insurers are expected to
post "solid" third-quarter profits, according to forecasts by
several analysts, in the absence of major claims from U.S.
hurricanes.
Still, costs for significant weather-related losses elsewhere
will be higher than in the year-ago quarter, notably due to
earthquakes in New Zealand and floods and storms in Europe and
Asia, though the impact will be well within budgets and only
visible in slightly higher combined ratios.
Against the background of a solid earnings cushion after the
first nine months, analysts expect the companies to comment with
more confidence than before on their full-year earnings
targets.
For instance, Munich Re AG (MUV2.XE), the largest reinsurer
worldwide by gross premium income, "may adopt a slightly more
positively worded guidance for the year," given the low losses from
Atlantic hurricanes, Helvea writes in a research note. Munich Re
previously guided that its 2010 target of an after-tax profit of
above EUR2 billion is ambitious but achievable, despite substantial
disaster costs in the first half.
Hannover Re AG (HNR1.xe) already said its third-quarter and
full-year net profits will get a boost of around EUR100 million
following a decision by a German federal fiscal court, as
provisions made for potential additional taxation at Irish units
are no longer needed and can be released. Excluding that effect,
Hannover Re has said it expects a net profit of around EUR600
million for 2010.
Swiss peer Swiss Reinsurance Co. (RUKN.VX) set an upbeat tone
Thursday, when it reported a nearly doubling in third-quarter net
profit to $618 million from $314 million a year earlier. The
figures beat analyst forecasts as the reinsurer benefited from
solid underlying operations and the absence of a charge that hurt
the year-earlier results. Analysts consensus forecasts for the
German peers appear a bit more subdued.
COMPANIES TO WATCH:
*Munich Re (MUV2.XE) -- (Nov. 9)
MARKET EXPECTATIONS: Munich Re is expected to report a net
profit of around EUR612 million for the third quarter, down 4.9%
from EUR643 million a year earlier, according to an average
forecast in a Dow Jones Newswires poll of 13 analysts. Analysts
forecast a decline in the quarterly investment result and a higher
combined ratio--reflecting a slightly higher burden from large
disasters compared with revenue--which isn't offset by the increase
in premium income.
MAIN FOCUS: Analysts eye a more positive guidance on the
full-year profit goal and signals that the dividend payment for
2010 could be higher than the EUR5.75 a share the company paid for
2009. The company also has yet to come up with new mid-term targets
for its primary insurer Ergo Versicherungsgruppe AG (EVG2.XE)
*Hannover Re (HNR1.XE) -- (Nov. 10)
MARKET EXPECTATIONS:
Hannover Re, one of the five largest reinsurers worldwide, is
expected to report a net profit of around EUR250 million, up 54%
from EUR163.1 million a year earlier, according to a Dow Jones
Newswires poll of 14 analysts. Hannover Re will benefit from a
one-time boost in the third quarter and gross premium growth, which
is expected to outweigh a weaker investment result and higher
claims burden in the quarter.
MAIN FOCUS: As the nine-month net profit--seen around EUR561
million--will already be close to the full-year target of EUR600
million, analysts are looking for an upward revision of that
target. An uplift in the dividend is also being eyed. Hannover Re
paid EUR2.10 a share for 2009 and has said it aims for EUR2 a share
for 2010. But in general, its dividend payout target is 35% to 40%
of net profit.
*Allianz SE (ALV.XE) -- (Nov. 10)
MARKET EXPECTATIONS: Allianz SE, Europe's largest primary
insurer by market capitalization, is expected to report a net
profit of around EUR1.17 billion for the third quarter, down 11%
from EUR1.32 billion a year earlier, according to an average
consensus in a Dow Jones Newswires poll of 14 analysts.
Analysts forecast a weaker performance of the insurance
operations, notably the property-casualty business due to costs for
floods, earthquakes and storms, which won't be offset by
improvements in asset management and higher overall revenue.
Operating profit is expected to come in at EUR1.92 billion, down
0.3% from EUR1.93 billion a year earlier. Still, Allianz is
expected to benefit from good third-quarter results of its
financial investment in Hartford Financial Services Group
(HIG).
MAIN FOCUS: Analysts expect an update on Allianz's full-year
goal of an operating profit of around EUR7.2 billion, give or take
EUR500 million. They are also eyeing clearer guidance on
acquisitions the company might envisage.
-By Ulrike Dauer, Dow Jones Newswires; +49 69 29725 500;
ulrike.dauer@dowjones.com