(Bloomberg) -- Hannover Re, the world’s third-biggest reinsurer, rose the most in more than two years after saying it will pay a special dividend and fourth-quarter profit climbed more than analysts estimated.
The shares increased as much as 5.6% in Frankfurt trading, the biggest intraday gain since November 2012. They climbed 5.2% to 91.65 euros at 11:44 a.m., extending this year’s advance to 22% and valuing the company at about 11 billion euros. The Bloomberg Europe 500 Insurance Index rose 16% over the same period.
Net income climbed 9.4% to 290 million euros ($312 million) from a year earlier, the company said Tuesday. That beat the 244 million-euro average estimate of eight analysts surveyed by Bloomberg. The reinsurer will pay a regular dividend of 3 euros a share plus an additional 1.25 euros. Hannover Re was expected to keep the amount unchanged from the 3 euros it paid in 2013, according to a Bloomberg Dividend Forecast.
Hannover Re’s annual net income rose 10% to 986 million euros, beating the average analyst estimate of 931 million euros and Hannover Re’s target of 850 million euros.
Successful Year
Chief Executive Officer Ulrich Wallin, 60, said the company’s target for full-year profit of about 875 million euros this year remained unchanged, provided large damage claims don’t “significantly exceed” 690 million euros.
“The successful financial year was based on a 25% rise in net income in life and health reinsurance and the continued good underwriting result in property and casualty,” Wallin said. “We were able to slightly improve our investment income despite the challenging market environment.”
Costs for major losses declined to 426 million euros last year. That compares to a budget of 670 million euros set aside by Hannover Re and to 578 million euros of major claims paid in 2013. Income from the company’s investments rose 4.3% to 1.47 billion euros last year, helped by higher returns from real estate and alternative assets.
Prices that Hannover Re charges customers for coverage fell for a second year in January, the company said last month. A continuing inflow of capital from alternative markets, especially in natural catastrophe reinsurance, is putting prices under pressure, it said.
Reinsurers help primary insurers shoulder risks. The rates they charge to backstop claims from catastrophes such as hurricanes and earthquakes, typically the most costly disasters, declined in seven of the last 10 years, according to the Guy Carpenter World Property Catastrophe Rate on Line Index.
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