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Hannover Re's prediction for capital markets' prospects dims

HANNOVER Re has turned more wary about the outlook for capital markets this year, making its annual earnings goal tougher to reach despite forecast-beating profit in the first quarter.

The world's fourth-biggest reinsurer yesterday said quarterly operating profit soared 25 percent to more than US$400 million, defying analysts' predictions of a 10-percent decline.

The result was boosted by the recent acquisition of a portfolio of business in life reinsurance, which helped mask a drop of nearly a fourth in net income from investments.

The company's new Chief Financial Officer, Roland Vogel, told Reuters it was still possible to reach its net profit goal of nearly 700 million euros (US$927 million) this year but the outlook for the financial markets was not helping.

"We have become a bit more cautious because we see the capital markets more pessimistically than before," Vogel said, adding Hannover Re was unlikely to start investing again in the equity markets in the second half as it had initially expected.

Analysts polled by Reuters had on average expected 2009 net profit of 535 million euros, up from a 2008 loss of 127 million euros.

The company said it expected to earn at least 5 euros per share this year including the new life reinsurance business. Its previous EPS target of 4.75 euros to 5.25 euros had excluded the acquisition.

"The new target can be considered a well-communicated profit warning," DZ Bank Thorsten Wenzel said in a note to clients.


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