2013-08-23 16:42:04 -
A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating (FSR) of A+ (Superior) and the issuer credit ratings (ICR) of “aa-” of Hannover Rueck SE (Hannover Re) (Germany) and its main subsidiaries. At the same time, A.M. Best has affirmed the debt ratings of Hannover Finance (Luxembourg) S.A. (Luxembourg), which are either issued or guaranteed by Hannover Re. The outlook for all ratings remains stable. (See below for a detailed listing of all companies and ratings.)
Despite a fall in unrealised gains on Hannover Re’s investment portfolio during the first half (H1) of this year, A.M. Best expects risk-adjusted capitalisation to remain strong, supported by solid net earnings after dividends in 2013. Furthermore, risk-adjusted capitalisation
continues to be enhanced by an extensive hybrid debt programme, and in November 2012, the company issued a EUR 500 million convertible bond. Following the floating of Hannover Re’s majority shareholder, Talanx AG, in 2012, A.M. Best considers the financial flexibility of Hannover Re to be less constrained. Hannover Re continues to prudently manage its investments and maintains a low direct exposure to peripheral eurozone sovereign debt, which totalled less than 1% of total invested assets as at H1 2013 (EUR 65 million).
In 2013, Hannover Re is expected to report a consolidated net income after minorities of approximately EUR 800 million (2012: EUR 858 million). Overall operating results through the first six months of 2013 were in line with expectations, with the company reporting consolidated net income after minorities of EUR 408 million. Underperformance of US mortality business relating to the ING portfolio acquired from Scottish Re Group Limited resulted in a reduced life operating profit of EUR 111 million (H1 2012: EUR 155 million). However, this was offset by a solid performance on the non-life portfolio amounting to an operating profit of EUR 549 million (H1 2012: EUR 430 million), underlining the effectiveness of the company’s diversified business model. With over 50% of losses at H1 2013 relating to the European floods that occurred during May-June 2013, total non-life catastrophe losses were slightly higher than anticipated for H1, with Hannover Re utilising EUR 260 million of its total large loss budget. The remaining budget of EUR 365 million is expected to be sufficient to cover losses for the rest of 2013.
Hannover Re maintains an excellent profile in the global reinsurance markets benefitting from its diverse books of business, with approximately 56% of gross premium income emanating from its non-life portfolio and the remainder relating to life reinsurance business. At H1 2013, gross premium income increased by 4.9% (6.2% at constant currency rates) to EUR 7.2 billion (H1 2012: EUR 6.9 billion), driven by strong growth in the life portfolio, predominantly from new business from emerging markets, as well as a new UK pension transaction. At year-end 2013, growth in consolidated gross premium income is expected to be in line with the company’s target of 5%, buoyed by the strong growth of its life reinsurance portfolio.
Upward rating movements are unlikely at present.
Downward rating pressures could occur if there were a material decline in Hannover Re’s risk-adjusted capitalisation and/or a prolonged deterioration in operating earnings.
The FSR of A+ (Superior) and the ICRs of “aa-” have been affirmed for Hannover Rueck SE and its following subsidiaries.
- E+S Rueckversicherung AG
- Hannover Re (Bermuda) Ltd
- Hannover Life Reassurance Company of America
- Hannover Re (Ireland) Plc
- Hannover Life Reassurance (Bermuda) Limited
- International Insurance Company of Hannover Limited
The following debt ratings have been affirmed.
Hannover Finance (Luxembourg) S.A—(guaranteed by Hannover Re)
-- “a+” on the EUR 750 million subordinated fixed to floating rate bond, due February 2024
-- “a+” on the EUR 500 million subordinated fixed to floating rate bond, due September 2040
-- “a+” on the EUR 500 million undated guaranteed junior subordinated fix-to-floating callable bonds
-- “a+” on the EUR 500 million subordinated fixed to floating rate bond, due June 2043
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M.
Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
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