Hannover Re does not expect to be blown off course by damage from Hurricane Sandy in the United States, the German reinsurer said on Tuesday, as it beat quarterly profit forecasts and lifted expectations for this year and next.
Shares in the world’s third-biggest reinsurer surged over 6 percent in early Tuesday trading after it predicted net profit of at least €800 million [$1.02 billion) this year, a third higher than last, helped by surging investment income and a lack of big damage claims.
"In view of the opportunities on international reinsurance markets and its very good positioning, Hannover Re is expecting a very good result for the 2012 financial year," the company said in a statement.
After keeping silent on earnings guidance in the run up to the stock market flotation of its parent, Talanx, Hannover Re also said it also expected to earn net profit of around €800 million in 2013.
This is well above analysts' average expectation of around €770 million [$985 million] this year and €760 million [$973 million] in 2013, according to Thomson Reuters data.
Hannover Re’s shares were up 6.3 percent to €56.93 [$72.87] by 0930 GMT, the biggest rise on Frankfurt’s MDAX index of mid-cap stocks. The STOXX Europe 600 insurance index rose 0.8 percent.
While it is too early to give an estimate for damage claims from Hurricane Sandy, Chief Financial Officer Roland Vogel said he expected the company to be able to absorb any losses, including those from business interruption claims, within its projected budget for the year.
“We don’t see our annual (disaster) budget in danger in view of current developments,” Vogel told a conference call with journalists.
The company expected to stay within budget if the insured market loss from the storm remained within the $5 billion to $20 billion estimated by risk modeling agencies, Vogel said.
Hannover Re has used up only €193 million [$247 million] in the first nine months of the €560 million [$717 million] it had penciled in for big damage claims in 2012.
The company’s net profit beat forecasts in the third quarter, rising by 63 percent to nearly €266 million [$340 million].
The highest forecast in a Reuters poll was for €240 million [$307 million], with the poll average coming in at €213 million [$273 million].
Hannover Re, in which insurer Talanx has a 50.2 percent stake, trades at 8.4 times 12-month forward earnings, a premium to Munich Re at 8.0 times, but a discount to Swiss Re , which trades at a multiple of 8.8, according to Thomson Reuters StarMine, which weights analysts’ forecasts according to their track record.
(Reporting by Jonathan Gould; Editing by Mark Potter)