A.M. Best Revises Outlook to Stable for Issuer Credit and Debt Ratings of HDI-Gerling Industrie Versicherung AG
OLDWICK, N.J.-(Business Wire)-September 24, 2009 - A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit rating (ICR) of “a” of HDI-Gerling Industrie Versicherung AG (HGI) (Germany). Concurrently, A.M. Best has affirmed the debt rating of “bbb+” on the EUR 250 million subordinated fixed to floating rate notes due 2024 issued by the former Gerling-Konzern Allgemeine Versicherung AG (GKA) (Germany), which is now merged into HGI. The outlook for the ICR and debt has been revised to stable from positive, whereas the outlook for the FSR remains stable. (See today’s related press release on HDI Haftpflichtverband de Deutschen Industrie V.a.G. and Talanx AG).
The ratings of HGI reflect both explicit and implicit support from its parent company, Talanx AG. This rating factor has led to the change in the ICR outlook. The explicit support from Talanx AG comprises a profit and loss absorption agreement, although this agreement limits HGI’s ability to retain earnings.
The ratings also reflect A.M. Best’s expectation that HGI’s risk-adjusted capitalisation is likely to remain good in 2009, supported by its investment revaluation reserves and a reduction in investment risk following the partial sale of the company’s equity portfolio.
Following a year of strong underwriting performance, A.M. Best anticipates that HGI’s underwriting result will remain resilient, despite marginal deterioration in 2009, as the favourable claims environment experienced in 2008 is unlikely to continue. As a consequence, the company’s combined ratio is expected to increase to marginally above 95%, up from 93.8% in 2008. The company’s profit before tax is likely to fall to approximately EUR 150 million, down from EUR 176 million in 2008. HGI benefited from a 12 percentage point improvement in its combined ratio in 2008 due to the favourable claims environment in property and liability lines.
In A.M. Best’s opinion, HGI’s excellent business profile in the German industrial market has been strengthened by the integration of the former Gerling operations. However, A.M. Best expects HGI’s gross premiums written to decline by approximately 5% to EUR 2.3 – 2.4 billion in 2009 due to decreasing premiums in recession-prone lines such as marine, aviation and liability. In 2008, gross premiums written decreased by approximately 10% to EUR 2.5 billion, mainly due to portfolio transfers to other insurance entities within Talanx AG. Overall, HGI primarily writes insurance for German industrial clients.
For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.
The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.
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