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Hannover Re sets New Zealand quake hit at $209M


FRANKFURT, Germany (Reuters)—Hannover Reinsurance Co. forecast a €150 million ($209 million) hit from last month's devastating earthquake in New Zealand, driving its share price up as much as 4% on relief the loss was not larger.

The world's third-biggest reinsurer said on Friday its estimate was based on an insured market loss of about $10 billion New Zealand ($7.42 billion).

"Even if this figure rises, Hannover Re's loss expenditure will not increase on account of its retrocession structure," the company said, referring to its arrangements to cap its own loss by passing excess damage claims on to either other reinsurers or financial market investors.

Reinsurer shares sagged this week after global No. 2 player Swiss Reinsurance Co. Ltd. announced on March 2 that it faces around $800 million in claims from the earthquake, pushing the reinsurer over its 2011 budget for natural catastrophes.

Swiss Re and other insurance observers have said that the magnitude-6.3 earthquake, which struck Christchurch, New Zealand, on Feb. 22 and claimed more than 160 lives, could entail insurance industry claims of up to $12 billion.

"This is really good news, as a lot of investors had feared costs would be higher, especially after Swiss Re's announcement earlier this week," a trader said of Hannover Re's loss estimate.

Shares of Hannover Re, which is due to report its 2010 financial results on March 9, pared gains to trade 3.2% higher by 1412 GMT, outpacing a 1.5% rise in the Stoxx Europe 600 insurance index.

Earnings event

Despite the investor relief on Friday, the financial hit is significant.

The €150 million claims estimate is higher than the €113 million loss on an earthquake that struck the same area in September last year, though it does not match the €180 million in claims from an earthquake in Chile in February 2010.

"The New Zealand quake without doubt will leave its mark on first-quarter results," NordLB analyst Constantin Rohrbach said in a note to clients.

Claims from the quake as well as from flooding in Brisbane, Australia, so far this year may have used up nearly half of Hannover Re's theoretical budget for natural disaster losses of €530 million ($738.5 million) for the full-year 2011, long before the start of the North Atlantic hurricane season in June.

JPMorgan Chase & Co. analyst Michael Huttner said the catastrophe budgets at major European reinsurers Swiss Re, Munich Reinsurance Co., Hannover Re and SCOR S.E. had already taken a heavy hit for the year on the New Zealand quake, plus Australia's floods and Cyclone Yasi.

"We believe the earnings outlook for 2011 is reduced, as there are still three quarters of potential natural catastrophe losses to come and we believe it is unlikely that there will be no more nat cats for the rest of the year," he said in a research note.

But Mr. Huttner said his long-term outlook and price targets on the companies remained unchanged, as the losses would have little effect on reinsurers' business models.

The world's biggest reinsurer, Munich Re, is expected to give estimates of its first-quarter loss claims next week.

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