Earnings Reports Summaries: Allianz, Allied World, CastlePoint, Hannover Re

The following companies, listed in alphabetical order, have recently reported third quarter and nine-month earnings results. To obtain the complete report, supplemental information, as well as the details of investors’ and analysts’ conference calls, go to the web site indicated.

Germany’s Allianz Group (www.allianz.com) increased its third quarter net income by 20.7 percent to €1.92 billion ($2.826 billion). Operating profit was €2.6 billion ($3.83 billion). Compared with the first nine months of 2006 net income by 29.2 percent to €7.3 billion ($10.75 billion) for the first nine months of 2007. Operating profit on a nine-month basis increased by 7.8 percent € 8.76 billion ($12.9 billion), including the third quarter figures.

Total revenues in the third quarter amounted to €23 billion ($33.86 billion), around a €400 million ($589 million) increase.
Dresdner Bank achieved an operating profit of €87 million ($128 million) “despite turbulence in the financial market and the effects on the trading result. During the first nine months of 2007 Dresdner Bank was able to slightly surpass its operating profit, compared with the same period of the previous year.”

As expected, shareholders’ equity fell by 2.8 percent from €50.5 billion ($74.34 billion) as of December 31, 2006, to €49.1 billion ($72.28 billion) as of September 30, 2007. This was mainly a result of goodwill from the AGF minority buy-out netted against shareholders’ equity.

Allianz P/C business grew as gross premiums written increased by 2.5 percent to €10.7 billion ($15.75 billion). Operating profits for the quarter, however fell by 13.9 percent to €1.5 billion ($2.2 billion) from the €1.7 billion ($2.5 billion) posted in Q32 2006, primarily from the increased cost of natural catastrophes.
Helmut Perlet, CFO of Allianz SE stated that the “positive result performance confirms our annual forecast for 2007 of €8 billion ($11.77 billion) for net income and €11 billion [$16.2 billion] for operating profit.”

Allied World Assurance (www.awac.com) reported net income of $109 million, or $1.72 per diluted share, for the third quarter 2007 compared to net income of $114 million, or $1.89 per diluted share, for the third quarter 2006. Net income for the nine months ended September 30, 2007 was $346.2 million, or $5.51 per diluted share, compared to net income of $314.5 million, or $5.76 per diluted share in 2006.

Operating income was $112.2 million, or $1.77 per diluted share, for the third quarter 2007 compared to operating income of $122.5 million, or $2.03 per diluted share, for the third quarter 2006. Operating income for the nine months ended September 30, 2007 was $357.9 million, or $5.70 per diluted share, compared to operating income of $338.5 million, or $6.20 per diluted share, for the first nine months of 2006. The decrease in diluted earnings per share amounts reflects the increase in the number of common shares outstanding resulting primarily from the company’s initial public offering in July 2006.

President and CEO Scott Carmilani commented, “Allied World continues to produce consistent results and to grow shareholders’ book value. Through September, the company has increased diluted book value per share by 19.8 percent, on an annualized basis. The company has benefited from significantly increasing investment income and from a light catastrophe period.”

Bermuda-based CastlePoint Holdings, Ltd. (http://www.castlepoint.bm) posted net income of $10.5 million and diluted earnings per share of $0.27 for the third quarter of 2007. Net income and diluted earnings per share excluding realized and unrealized gains/losses (operating income) was $11.5 million and $0.30 per share, respectively.
Key Highlights included the following:
— For the first nine months of 2007, CastlePoint reported net income of $28.1 million and diluted earnings per share of $0.78. Excluding realized and unrealized gains (losses), reported net income was $29.1 million and $0.81 per diluted share, respectively.
— Net premiums written for the quarter were $90.6 million, increased 107 percent from $43.7 for the same period in the prior year.
— Net combined ratio for the total of our reinsurance and insurance segments was 89.5 percent for the quarter.

CEO Michael H. Lee noted: “Despite the softening market conditions in the property and casualty industry, we continue to see very strong demand for our products at attractive margins. Our approach of providing paper, capital and insurance services to solve our clients’ problems is resonating strongly with our clients. Based upon the agreements that we have entered into thus far and the strong pipeline of business opportunities that we are seeing, we anticipate strong premium growth and earnings in the fourth quarter and in 2008.”

Hannover Re (http://www.hannover-re.com) reported highly satisfactory interim results for the third quarter. Operating profit rose 14.3 percent to €690.3 million ($1.01 billion); group net income rose 55 percent to 589.3 million ($865 million), helped by changes in German corporate tax laws; return on equity was up 25.7 percent and non-life reinsurance rose 17.5 percent.

The results were so good that CEO Wilhelm Zeller stated: “With our result we have put in place a good platform for surpassing our originally envisaged profit target for the full financial year – namely a return on equity of at least 15 percent. Indeed, taking into account the non-recurring effect from the tax reform, the return on equity is set to reach at least 20 percent.”

Hannover Re’s gross premiums booked for the first nine months “contracted as expected by 11.1 percent,” said the bulletin – to €6.4 billion ($9.4 billion). “Key factors here were the sale of Praetorian and the associated withdrawal of Clarendon from active specialty business,” the announcement explained. “These effects were not entirely offset by the vigorous growth in life and health reinsurance. At constant exchange rates the decline in gross premium volume would have been 8.0 percent. In view of the increase in the level of retained premium to 86.4 percent (76.3 percent), net premium nevertheless climbed by 4.5 percent to €5.5 billion.”

Zeller noted that in the non-life reinsurance market, “even though the hard market has now passed its peak, the decisive factor is that rates in most segments are still commensurate with the risks and hence the business outlook remains bright.”l Only in a few lines, such as US casualty business – and here especially directors’ and officers’ (D&O) insurance -, are prices and conditions no longer adequate in certain segments.”