A.M. Best Affirms Rating of International Insurance Company of Hannover Limited; Assigns Issuer Credit Rating.OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) of International Insurance Company of Hannover Limited (Inter Hannover) (United Kingdom), a subsidiary of Hannover Rueckversicherung AG (Hannover Re Hannover Re (FWB: HNRGn), in German Hannover Rückversicherung AG, with gross premium of around €9 billion in 2006, is one of the five largest reinsurance groups in the world. Its headquarters are in Hanover, Germany. ) (Germany). At the same time, A.M. Best has assigned an issuer credit rating of "a-" to Inter Hannover. The outlook for both ratings is stable. The ratings reflect Inter Hannover's continuing importance to Hannover Re and its improving risk-adjusted capitalisation. Offsetting factors are poor returns on premium and the effect of softening rates. Continuing importance to Hannover Re--The ratings factor Inter Hannover's importance to Hannover Re as its only platform for writing agency business in the United Kingdom and across Europe. Additionally, Inter Hannover exclusively fronts business for its parent in these regions where Hannover Re is not licensed to write direct business. Inter Hannover also shares resources available through Hannover Re such as its security committee, actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin , legal and underwriting support functions. Improving risk-adjusted capitalisation--A.M. Best expects Inter Hannover's risk-adjusted capitalisation to improve in 2006 and 2007 due to an increase in share capital of GBP GBP In currencies, this is the abbreviation for the British Pound. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 5 million (USD USD In currencies, this is the abbreviation for the U.S. Dollar. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 9.4 million) and an additional subordinated loan In the field of finance, a subordinated loan is a type of loan which ranks after other debts should a company fall into receivership or be closed. It is also known as subordinated debt, or as junior debt. issue of GBP 6.7 million (USD12.6 million) to Hannover Re. The proceeds from the debt issue have some equity characteristics for which A.M. Best has given partial credit in its quantitative analysis Quantitative Analysis A security analysis that uses financial information derived from company annual reports and income statements to evaluate an investment decision. Notes: of Inter Hannover. A.M. Best's analysis of Inter Hannover's risk-adjusted capitalisation factors the company's high level of reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. recoverables arising from Hannover Re (81% of all recoveries as at the 2005 year end). Poor returns--A.M. Best expects a poor return on net premiums of 0.4% in 2006 (0.5% in 2005), driven by a high loss ratio of 77%, leading to a combined ratio of around 109% (including non-technical operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. related to managing agents). Results are likely to remain depressed due to the financial drag from a significant unprofitable agent. This negative impact will reduce into 2007 as the five-year agreement on a short-tail personal lines account terminates in 2006. A.M. Best believes changes in risk management and contract structure that were implemented by the new management team will curtail the chances of any one agent being so significant that it could adversely affect the overall profitability of the company. For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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