EARNINGS PREVIEW: German Insurs 3Q To Post Solid 3Q Profits

TAKING THE PULSE: German insurers and reinsurers will report solid profits for the third quarter, benefiting from a mild hurricane season and improved capital markets, which should also be reflected in stronger balance sheets.

Swiss peer Swiss Reinsurance Co. (RUKN.VX) set the tone for the sector Tuesday when it reported a swing to a third-quarter net profit on cost-cutting, low catastrophe claims and generally improved reinsurance markets.

The sector benefited from low costs for large-disaster claims in the three months July through September that were limited to small damage caused by hailstorms in Central Europe and Canada, an industrial fire claim in Russia and a flood in the Philippines. Around this time last year, insurers and reinsurers were heavily hit by large sums they had to pay for claims caused by Hurricanes Gustav and notably Hurricane Ike, which - in combination with the widening financial crisis - caused several companies to warn on profits. Ike alone caused an estimated market loss of between $15 billion and $20 billion for the entire sector, according to a Hannover Re AG (HNR1.XE) estimate based on publicly available information.

COMPANIES TO WATCH:

*Munich Re (MUV2.XE) -- (Nov. 5)

MARKET EXPECTATIONS: Munich Re, one of the two largest reinsurers worldwide by premium income, is expected to swing to a net profit of EUR727 million from a net loss of EUR3 million a year earlier according to an average forecast in a Dow Jones Newswires poll of 12 analysts.

Analysts on average predict an 11% improvement in premium income to EUR10.3 billion. Property-casualty premiums are benefiting from the acquisition of engineering insurance specialist Hartford Steam Boiler Inspection and Insurance Co., and life-health reinsurance premiums from nine large five-year life reinsurance contracts signed earlier this year.

As a result of moderate claims, the non-life combined ratio is expected to improve to 97.0%, which is Munich Re's target, from 101.2%. A figure below 100% means the insurer's underwriting business has been profitable. The strong recovery in both stock and bond markets will contribute to lift shareholders' equity and the investment result, which is expected to triple to EUR1.99 billion from EUR662 million.

On the downside, Munich Re's primary insurer Ergo Versicherungsgruppe AG (EVG2.XE) will likely reflect depressed margins due to low investment returns and weak new business, as the still sluggish economy limits what people set aside less for insurance and retirement products.

MAIN FOCUS: Update eyed on recently resumed share buybacks and expectations for 2010 contract renewals after industry meetings in Monte Carlo and Baden-Baden. Outlook watched on full-year targets, plans for dividend and prospects for Ergo.

*Hannover Re (HNR1.XE) -- (Nov. 6)

MARKET EXPECTATIONS: Hannover RE, one of the world's five largest reinsurers worldwide, is forecast to report a quarterly net profit of EUR151 million, according to a Dow Jones Newswires poll of 14 analysts. The figure would mark a substantial improvement from a EUR395 million loss in the year-ago quarter when Hannover Re also announced it wouldn't pay a dividend for 2008.

Investment result is forecast at EUR281 million compared with an investment loss of EUR75 million in the third quarter of 2008. The combined ratio is seen improving to 97.7% from 114.2%.

Premium income is expected to have gained 25% to EUR2.46 billion from EUR1.96 billion a year earlier, benefiting from the contribution of the U.S. individual life reinsurance portfolio that Hannover Re bought from Bermuda-based reinsurer Scottish Re Group Ltd. (SKRRF) in the first quarter.

MAIN FOCUS: Update awaited on full-year targets, whether there's room to lift the company guidance, shareholders' equity.

*Allianz SE (ALV.XE) -- (Nov. 9)

MARKET EXPECTATIONS: Allianz SE, Europe's largest primary insurer by market capitalization, is expected to report substantial improvements in third-quarter net and operating profits compared with a year earlier, when loss-making Dresdner Bank, the financial crisis and weak capital markets were a drag on earnings.

Analysts from DZ Bank and UniCredit expect quarterly net profit in an area of EUR1.27 billion and EUR1.29 billion, while a Cheuvreux analyst expects EUR1.48 billion. Main drivers are the realization of capital gains, for instance from Allianz's reduction in the Commerzbank AG (CBK.XE) stake to 10.1% from 13.8% and from marking to market some Hartford Financial Services Group Inc. (HIG) warrants held in the trading book, Cheuvreux analyst Michael Haid writes.

All figures would reflect a substantial improvement from EUR545 million net profit from continuing operations the insurer posted in the same quarter a year ago. It is also significantly better than the EUR2.2 billion net loss that Allianz posted a year earlier when adding in the loss contribution from Dresdner Bank, which it still owned. The sale of Dresdner Bank to Commerzbank was closed in the first quarter.

Operating profit, forecast at EUR1.85 billion to EUR1.88 billion, is also above the year-ago figure of EUR1.56 billion, helped by strong contributions from life/health insurance and financial services that are more than offsetting the lower contribution from the property/casualty business.

Life/health insurance and asset management business will also have benefited from spread narrowing of corporate bonds and rising stock markets, analysts said.

For better comparison of the operating performance trend, several analysts preferred to liken the third-quarter figures to the second quarter, when Allianz posted a net profit of EUR1.87 billion and operating profit EUR1.79 billion

MAIN FOCUS: Investors are eyeing an update on clear full-year goals, which Allianz has yet to issue, capital position and solvency ratio. Allianz recently announced the delisting of its shares from the New York Stock Exchange (NYX), effective Oct. 23, and other European stock exchanges in a move to reduce reporting complexities.

Company Web sites: www.munichre.com; www.hannover-re.comwww.allianz.com;

-By Ulrike Dauer, Dow Jones Newswires; [phone]; [e-mail]