Vienna Insurance Misses 2014 Profit Estimates on $85 Million Heta Writedown

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Vienna Insurance Group AG wrote down debt of Austrian “bad bank” Heta Asset Resolution AG by 80 million euros ($85 million), a larger amount than expected, causing the firm to miss estimates for profit last year.

The insurer, based in Austria’s capital, reported net income rising 57 percent to 366.8 million euros ($387 million) for 2014, according to a statement Tuesday. The increase was less than the average estimate of 420.7 million euros of seven analysts.

Heta’s creditors, who also include Pacific Investment Management Co. and Commerzbank AG, are being forced to book the losses after Austria stopped funding the wind down of Heta, a remnant of a bank whose rapid expansion unraveled into near- collapse after the 2008 financial crisis.

“I didn’t expect them to book the full extent in the fourth quarter,” Bernd Maurer, a Vienna-based analyst at Raiffeisen Centrobank, said by telephone. “One-off or not, the effect has to be booked and hits the capital.”

The company booked a complete loss on about 55 million euros of Heta’s subordinated debt and wrote down half of its 50 million euros of senior bonds. Heta owes about 7.1 billion euros to German banks and insurers, and senior bonds should be written down by at least half, Bundesbank board member Andreas Dombret said on April 10.

Vienna Insurance also said that lower interest rates resulting from the European Central Bank’s bond-buying program may “gravely hit” its investment returns. The financial result may fall by “three-digit million euros” from 1.12 billion euros in 2015, Chief Financial Officer Martin Simhandl told a press conference.

Pretax profit was 518.4 million euros compared with 355.1 million euros in 2013. The company was expected to earn 562.7 million euros, according to nine estimates compiled by Bloomberg.

Vienna Insurance shares fell as much as 1.5 percent and traded at 41.91 euros, down 0.9 percent, at 1:18 p.m.