Talanx of Germany Says 2008 Profit to Slump 93% on Investments

By Oliver Suess
Bloomberg News
December 3, 2008

Dec. 3 (Bloomberg) -- Talanx AG, Germany's third-biggest insurer, said losses on equity investments are expected to cause a 93 percent drop in profit this year.

"The financial markets crisis has hit our business especially hard as impairments on equities are not tax- deductible in Germany," Talanx Chief Executive Officer Herbert Haas said at a press conference in Hanover yesterday evening. "Still, Talanx remains well capitalized with a solvency ratio above 140 percent," he added.

The insurer expects net income to drop to 32 million euros ($40.6 million) this year from 477 million euros in 2007. That follows 1.1 billion euros in losses and impairments on equity investments and 160 million euros in writedowns related to corporate bonds from companies such as Lehman Brothers Holdings Inc. and Washington Mutual Inc.

Earnings at insurers and reinsurers including Hanover, Germany-based Talanx, Allianz SE and Munich Re have been depleted by impairments on equity investments after stock markets worldwide slumped 47 percent since the beginning of this year, according to the MSCI World Index.

"Our investment results will improve considerably next year, allowing us to return to our former strength in earnings power," Haas said. The insurer reduced the equity share among its investments to 1 percent from as much as 8 percent during the course of the year, he said.

'Fully Committed'

Talanx "remains fully committed" to its majority holding in reinsurer Hannover Re, in which it owns 50.2 percent, Haas said. Hannover Re is heading for its first-ever annual loss this year after impairments on equity investments led to a loss of 142.8 million euros in the first nine months.

Talanx reiterated its interest in acquisitions. "We are looking at opportunities that may arise from problems at other insurers," Haas said. The company is especially interested in areas such as South America and eastern Europe, Haas said.

"We still have a credit line of about 1 billion euros that runs until 2012 and some additional cash reserves at hand to pursue our goal to generate half of our premium income from abroad in the mid-term," Haas said.

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