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Hannover Re, Talanx warn on profit after hurricanes, Mexico quake

Posted On: Sep. 21, 2017 8:54 AM CST

(Reuters) — German reinsurer Hannover Re S.E. and its parent, Talanx A.G., warned on Thursday they may miss their 2017 profit targets due to claims from a series of hurricanes and an earthquake in Mexico.

Insurers and reinsurers are counting the cost of hurricanes Harvey and Irma, which hit Texas, the Caribbean and Florida's Gulf Coast in late August and early September, causing tens of billions of dollars in damage.

They have been closely followed by Mexico's most deadly earthquake in three decades and Hurricane Maria, which hit Puerto Rico on Wednesday.

Hannover Re said its budget for big natural disasters, €825 million ($980 million) for 2017, could absorb losses from those two hurricanes but said Maria and the earthquake in Mexico would put it over the top and put its full-year goals at risk.

Hannover Re has targeted a 2017 net profit of €1 billion, and Talanx, which owns just over 50% of Hannover Re, has aimed for a profit of around €850 million.

The companies' warning follows a similar announcement from German rival Munich Reinsurance Co. last week, which was the first major reinsurer to flag a hit to earnings from Harvey and Irma.

Risk modeling firm Risk Management Solutions Inc. estimates insured losses from Harvey of $25 billion to $35 billion and for Irma at $35 billion to $55 billion. Hannover Re and Talanx said it was too soon to say how much damage Hurricane Maria and the earthquake will cause.

Morgan Stanley said it expected that overall insured industry losses from these catastrophes could approach $100 billion, which could give reinsurance prices a welcome lift.

DZ Bank analyst Thorsten Wenzel said he believed that Hannover Re and Talanx could offset some of the large losses by releasing reserves.

Shares in Talanx were up 0.5% at €34.44 by 0742 GMT, in line with the STOXX Europe insurance index. Hannover Re was broadly flat at €100.30.

Hannover Re said a dividend payment at last year's level of €5 per share was still possible. Talanx said a dividend at least at last year's level of €1.35 was "assured from today's perspective."