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Hannover Re posts YOY rise in Q2 profit, but says market 'remains challenging'

Hannover Re saw its second-quarter group net income increase to €270.2 million from the restated €216.8 million in the same period in 2016, and said it aims to achieve a group net income in excess of €1 billion for full year 2017.

EPS for the period was €2.24, up from €1.80 a year earlier. The S&P Capital IQ consensus normalized EPS estimate for the quarter based on four analysts reporting was €2.17.

Group net income at the property and casualty reinsurance division stood at €228.6 million in the second quarter, up from the year-ago €173.8 million, while net income at the life and health reinsurance business inched up on an annual basis to €53.6 million from €52.7 million.

Gross written premium rose on a yearly basis to €4.45 billion from €4.02 billion a year earlier. Net premium earned for the period totaled €3.79 billion, compared with €3.62 billion a year ago. For full year 2017, the company expects a 5% increase in gross premium for its total business.

Claims and claims expenses amounted to €2.94 billion in the second quarter, up from €2.64 billion a year ago.

Hannover Re also booked second-quarter net income from investments under own management of €336.0 million, up from €286.5 million. Net investment income also increased year over year, to €386.5 million from €378.5 million.

Return on investment, excluding funds withheld by ceding companies, stood at 3.2% in the period, compared to 2.9% a year earlier. The company aims to achieve a return on investment of more than 2.7% for full year 2017.

The firm's after-tax return on equity was 12.1% in the period, compared to 10.3% in the same quarter in 2016.

The combined ratio at the property and casualty reinsurance division, including funds withheld, was 97.4% in the quarter, compared to the year-ago 96.1%.

For the six months to June-end, the reinsurance company reported group net income of €535.0 million, up from €488.0 million a year earlier. EPS for the half was €4.44, up from the year-ago €4.05.

"Once again, both of our business groups, namely property and casualty and life and health reinsurance, as well as exceptionally good investment income all contributed to our pleasing half-yearly result," CEO Ulrich Wallin said. "We are nevertheless faced with a market situation that remains challenging going forward."

The company noted that its full-year 2017 net income target is conditional upon the burden of major losses not significantly exceeding the budgeted level of €825 million and that there are no unforeseen distortions in capital markets. The reinsurer reported a group net income of €1.17 billion for full year 2016.

Hannover Re also envisages a dividend payout ratio of 35% to 40% of its group net income under International Financial Reporting Standards for 2017.