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Hannover Re 9-month Profit Rises; Confirms FY18 Profit View

German re-insurer Hannover Re AG (HVRRY.PK,HVRRF.PK) reported that its Group net income for the nine-month of 2018 increased by 32.1% to 725.3 million euros from the prior year's 548.9 million euros. It confirmed the profit guidance of more than 1 billion euros for 2018.

Earnings per share for the nine-month period amounted to 6.01 euros, up from 4.55 euros in the prior year.

The operating profit or EBIT improved by 43.5% to 1.16 billion from last year.

Gross written premium for the Group increased by 11.2% to 15.0 billion euros from 13.5 billion euros in the prior year. This was driven primarily by substantial expansion of structured reinsurance solutions in property and casualty reinsurance business.

At constant exchange rates the increase would have been 16.5%, comfortably beating the growth target of more than 10%. Net premium earned was up by 10.7% to 12.8 billion euros or 15.9% adjusted for exchange rate effects.

Based on constant exchange rates, gross premium for fiscal year 2018 should grow by significantly more than 10% as anticipated; a major part of the growth is likely to derive from property and casualty reinsurance, most notably the area of structured reinsurance.

As things currently stand and allowing for possible strains in US mortality business, the dividend for fiscal year 2018 should at least reach the level of the previous year.

For fiscal year 2019, the company anticipates a stable profit contribution from property and casualty reinsurance and therefore expect Group net income in the order of 1.1 billion euros.

For the 2019 financial year Hannover Re anticipates gross premium growth - based on constant exchange rates - in the single-digit percentage range and a return on investment of 2.8%.

Reflecting the growth in the underlying business, Hannover Re also raised its net major loss budget for the first time in three years from EUR 825 million to EUR 875 million for 2019. The risk appetite remains unchanged.

Hannover Re continues to envisage a payout ratio for the ordinary dividend in the range of 35% to 45% of its IFRS Group net income. The ordinary dividend will be supplemented by payment of a special dividend in light of capital management considerations if the comfortable level of capitalisation remains unchanged.

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