LONDON--(BUSINESS WIRE)--A.M. Best has removed from under review with positive implications and upgraded the Long-Term Issuer Credit Ratings (Long-Term ICR) to “aa” from “aa-” and affirmed the Financial Strength Rating (FSR) of A+ (Superior) of Hannover Rueck SE (Hannover Re) (Germany) and its main subsidiaries. Concurrently, A.M. Best has removed from under review with positive implications and upgraded the Long-Term Issue 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 assigned to these Credit Ratings (ratings) is stable. (See below for a detailed listing of companies and ratings.)
The ratings were placed under review with positive implications on 13 October 2017, following the release of the updated Best’s Credit Rating Methodology (BCRM). The ratings have been removed from under review as A.M. Best has completed its analysis of the Hannover Re companies under the updated BCRM.
The rating upgrades reflect A.M. Best’s opinion that the rating fundamentals of the Hannover Re group, as analysed under the updated BCRM, are supportive of the revised Long-Term ICR. The ratings reflect Hannover Re’s balance sheet strength, which A.M. Best categorises as strongest, as well as its strong operating performance, very favourable business profile and very strong enterprise risk management (ERM).
Hannover Re’s consolidated risk-adjusted capital is assessed as strongest by A.M. Best. The group’s capital position is underpinned by good internal capital generation, moderate financial leverage through the hybrid debt programme and effective use of both traditional and alternative retrocession markets to reduce volatility arising from peak exposures. Additionally, Hannover Re’s balance sheet is supported by a low-risk investment profile and prudent reserving policy.
Hannover Re is the third largest global reinsurer with a highly diversified profile by product and geography. The group continues to enhance its global market footprint through a wide range of reinsurance and financial products to provide traditional and unique solutions to cedants in a highly competitive and challenging operating environment.
Hannover Re’s strong operating performance is demonstrated by a five-year weighted average non-life combined ratio of 94.9% and a return on equity of 14.6% (2012 to 2016). The life and health segment performs well overall, and reported a life technical margin of 5.3% in 2016. However, the mortality and morbidity segments of the life and health book remain an area of underperformance, with an EBIT of 3.4%, compared with an internal target of 6%. A.M. Best notes that the group’s new in-force mortality and morbidity business is producing stronger results for the company.
In the third quarter of 2017, Hannover Re was affected by a number of natural catastrophe events, including hurricanes Harvey, Irma and Maria. Net losses from these and other major natural and man-made events amounted to EUR 894 million in the first nine months of 2017, which is higher than the group’s large loss budget for the year of EUR 825 million. The group reported a solid return on equity of 8.5%, although below its initial strategic target of 9.7% due to the impact of these large losses. The result was helped by good technical margins from the life and health book and exceptional investment income arising through realised gains on equities. At the same time, reserve strengthening of EUR 291 million due to the changes in the Ogden rate was absorbed by reserve releases on other segments of the group’s portfolio.
Hannover Re’s ERM framework supports its complex globally diversified operations. The group has demonstrated use of its internal capital model and sophisticated risk management tools to implement its strategic plan and effectively manage risks in line with changing market conditions.
The Long-Term ICRs have been upgraded to “aa” from “aa-” and the FSR of A+ (Superior) affirmed for Hannover Rueck SE and its following affiliates:
- 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
- Hannover Life Reassurance Company of America
In addition, the following Long-Term IRs have been upgraded:
Hannover Finance (Luxembourg) S.A.—(guaranteed by Hannover Rueck SE)
— to “aa-“ from “a+” on the EUR 500 million 5.75% subordinated fixed to floating rate bond, due September 2040
— to “aa-“ from “a+” on the EUR 500 million 5.00% subordinated fixed to floating rate bond, due June 2043
Hannover Rueck SE—
— to “a+” from “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. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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