Hannover Re, the world’s third-biggest reinsurer, plans to pay a special dividend after fourth-quarter profit rose more than analysts estimated, helped by low catastrophe claims. The shares climbed.
Net income rose to 290 million euros ($313 million) from 265 million euros in the year-earlier period, the Hanover, Germany-based reinsurer said in a statement Tuesday. That beat the 244 million-euro average profit estimate of eight analysts surveyed by Bloomberg.
Chief Executive Officer Ulrich Wallin, 60, reiterated a target for full-year profit of about 875 million euros this year, provided large damage claims don’t “significantly exceed” 690 million euros.
Prices Hannover Re charges customers for coverage fell for a second year in January, the company said last month. A continuing inflow of capital from alternative markets, especially in natural catastrophe reinsurance, is putting prices under pressure, it said.
The reinsurer plans to pay a dividend of 3 euros a share plus a 1.25-euro special dividend for 2014, compared with 3 euros a share paid out for 2013. Hannover Re was expected to maintain a dividend payment of 3 euros a share for the current year, according to a Bloomberg Dividend Forecast.
Hannover Re shares gained 2.7 percent to 89.52 euros at 9:05 a.m., extending gains this year to 19 percent and valuing the company at about 10.8 billion euros. The Bloomberg Europe 500 Insurance Index rose 16 percent over the same period. Talanx AG, Germany’s third-biggest insurer, owns 50.2 percent of Hannover Re.
Hannover Re’s annual net income rose 10 percent to 986 million euros, beating the average analyst estimate of 931 million euros and Hannover Re’s target of 850 million euros.
“The successful financial year was based on a 25 percent rise in net income in life and health reinsurance and the continued good underwriting result in property and casualty reinsurance,” Wallin said in the statement. “Furthermore, we were able to slightly improve our investment income despite the challenging market environment.”
Costs for major losses declined to 426 million euros last year. That compares to a budget of 670 million euros set aside by Hannover Re and to 578 million euros of major claims paid in 2013. Income from the company’s investments rose 4.3 percent to 1.47 billion euros last year, helped by higher returns from real estate and alternative assets.
Reinsurers help primary insurers shoulder risks. The rates they charge to backstop claims from catastrophes such as hurricanes and earthquakes, typically the most costly disasters, declined in seven of the last 10 years, according to the Guy Carpenter World Property Catastrophe Rate on Line Index. They are under pressure because of an abundant supply of capital and lower-than-average disaster losses.