November 8, 2017 / 7:09 AM / 2 years ago

REFILE-UPDATE 2-Hannover Re posts steep drop in Q3 profit after natural catastrophes

(Refiles to add dropped words “in 2018”, paragraph 8)

* Expects reinsurance rates to rise after catastrophes

* Sale of 953 million euro stock portfolio buoys profit

* Expects 2017 group net income of around 800 million euro

FRANKFURT, Nov 8 (Reuters) - Hannover Re reported a 31 percent drop in its third-quarter net profit on Wednesday as natural catastrophes in North America took their toll.

But the drop was not as bad as analysts expected because the German reinsurer cashed in its 953 million euro portfolio in stocks of listed companies to buoy earnings.

Hannover Re also said that recent catastrophes would allow it to charge higher rates for reinsurance, which would help lift profitability.

In recent months, a series of hurricanes - Harvey, Irma and Maria - as well earthquakes have rocked the insurance industry after years of muted losses.

Hannover Re warned in September that it could miss its 2017 profit target because of claims from natural disasters, its first such warning since the 2008 financial crisis.

“After years of moderate losses we saw an accumulation of severe natural disasters in the third quarter,” Chief Executive Officer Ulrich Wallin said in a statement on Wednesday.

“Protecting against the consequences of such events is an absolutely central goal of reinsurance,” he said.

Hannover Re now expects group net income of around 800 million euros for the full year, which will rise to more than 1 billion euros in 2018, it said.

In a research note to investors, analysts with Baader Helvea wrote that Hannover Re usually is conservative in its guidance. The analysts recently upgraded Hannover Re to “hold” from “sell”.

Group quarterly profit fell to 548.9 million euros ($636 million) from 791.9 million a year earlier, beating analyst consensus for a loss of 93 million thanks to the sale of its stock portfolio.

The company said that the hurricanes Harvey, Irma and Maria, would not have a lasting impact on profitability or its capital.

“On the contrary: the recent loss events should cause market conditions to improve again for reinsurers,” the company said.

“Rates for catastrophe risks, in particular, are now likely to move higher and should generally prompt positive movements in other lines as well.”

$1 = 0.8631 euros Reporting by Tom Sims; editing by Maria Sheahan and Jason Neely

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