Reinsurer Hannover Re has reported break-even results for 2005 in the costliest year ever for insurers and warned that the industry would be hard hit in the event of a bird flu pandemic.

The operating profit for Hannover Re dropped from E538.8 million to E122.2 million. Group net income was reduced from E279.9 million to E49.3 million, producing earnings of 41 cents a share. The board has proposed withholding a dividend in view of the results.

The German reinsurer said that 2005 was unparalleled in its burden of natural catastrophe losses for the reinsurance industry. Loss expenditure was in excess of E1 billion. Hurricanes Katrina, Rita and Wilma alone inflicted a net loss on the company of almost E800 million.

CEO Wilhelm Zeller said: The fact that we were able to close this difficult financial year without depletion of our capital – unlike most of our competitors – is a testament to our strong profitability and good portfolio diversification.

All being well, the reinsurer expects an upturn in profits for next year. However, the head of life reinsurance for the company, Wolf Becke, told the Financial Times that the impact of a bird flu pandemic could have serious implications for the industry.

The group has estimated that half of its projected profit of E125 million for 2006 could be wiped out in the event of a bird flu pandemic in humans. Across the industry, the figure implied a potential loss of up to E10 billion, compared with estimates of up to E75 billion for the final bill from last year’s hurricane season, said the newspaper.