LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) of “aa-” of Hannover Rueck SE (Hannover Re) (Germany) and its main subsidiaries. Concurrently, A.M. Best has affirmed the Long-Term Issue Credit Ratings (Long-Term IR) of the existing debt instruments issued by Hannover Re or by Hannover Finance (Luxembourg) S.A. (Luxembourg) and guaranteed by Hannover Re. The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed list.)
The rating affirmations reflect Hannover Re’s excellent consolidated risk-adjusted capitalisation, highly diversified earnings and superior business profile. Partly offsetting factors are Hannover Re’s exposure to the deteriorating conditions in the global reinsurance market and the underperformance within some segments of its life and health portfolio. The ratings of Hannover Re have been extended to its main operating subsidiaries, which all maintain adequate levels of stand-alone risk-adjusted capitalisation.
Hannover Re’s excellent consolidated risk-adjusted capitalisation continues to be supported by the group’s strong earnings generation, access to the traditional and alternative retrocession markets and hybrid debt programme. The group’s financial leverage and interest coverage ratios remain well within A.M. Best’s tolerance for its ratings.
Hannover Re’s highly diversified profile and robust enterprise risk management support the resilience and stability of its operating results, in spite of the intense competitive conditions, low interest rates and the economic challenges it faces in some markets. Despite the high frequency of catastrophe/large losses experienced during the second quarter of 2016, Hannover Re’s performance remained strong with the group reporting a non-life combined ratio of 95.4% for the first half of the year, unchanged from the results reported in the same period of 2015. Total major losses arising during the first half of 2016, amounted to EUR 353 million (or 9.2% of non-life net earned premium), compared with the EUR 197 million (5.0%) for the same period in 2015. The life and health account produced a healthy EBIT margin (relative to net earned premium) of 5.4%, delivering on Hannover Re’s overall internal target.
The mortality and morbidity segments of the life and health account remain areas of underperformance for Hannover Re. This largely reflects the higher than expected levels of claims experience from the U.S. mortality account. Although management continues to take action to improve profitability, the performance of the mortality and morbidity segments fails to consistently meet expectations, as demonstrated by their combined EBIT margin of 4.3% for the first half of 2016, relative to the group’s internal target of 6.0%. Nonetheless, forthcoming earnings associated with new in-force business appears healthy, with the value of new business amounting to EUR 543 million in 2015, outperforming Hannover Re’s internal benchmark of EUR 180 million.
As the third largest global reinsurer, Hannover Re benefits from its highly diversified profile (by product, service offerings and geographic spread) and its lean and efficient infrastructure, which supports its relatively low expense base, allowing the group to focus on selective underwriting in the intensely competitive environment. Although global reinsurance conditions continue to deteriorate, A.M. Best believes that Hannover Re’s superior business profile will limit any downside pressures.
The FSR of A+ (Superior) and the Long-Term ICRs of “aa-” have been affirmed for Hannover Rueck SE and its following subsidiaries:
- E+S Rueckversicherung AG
- Hannover Re (Bermuda) Ltd
- Hannover Re (Ireland) Designated Activity Company
- Hannover Life Reassurance Bermuda Limited
- International Insurance Company of Hannover SE
The following Long-Term IRs have been affirmed:
Hannover Finance (Luxembourg) S.A.—(guaranteed by Hannover Rueck SE)
-- “a+” on the EUR 500 million 5.75% subordinated fixed to floating rate
bond, due September 2040
-- “a+” on the EUR 500 million 5.00% subordinated fixed to floating rate bond, due June 2043
The following Long-Term IR has been affirmed:
Hannover Rueck SE—
-- “a” on the EUR 500 million 3.375% undated junior subordinated fixed to floating rate bond
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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