LONDON--(BUSINESS WIRE)-- A.M. Best Europe – Rating Services Limited has revised the outlook of the issuer credit rating (ICR) to positive from stable and affirmed the financial strength rating (FSR) of A (Excellent) and the ICR of “a” of HDI Haftpflichtverband der Deutschen Industrie V.a.G. (HDI V.a.G.), the ultimate mutual parent company of Talanx AG, which is the intermediate management holding company for all HDI V.a.G. companies (collectively the Group). A.M. Best also has revised the outlook of the ICRs to positive from stable and affirmed the FSR of A (Excellent) and the ICRs of “a” of HDI-Gerling Industrie Versicherung AG (HDI-Gerling Industrie) and its subsidiary, HDI-Gerling Welt Service AG, the leading non-life direct insurance operation within Talanx AG.
Concurrently, A.M. Best has affirmed the ICR of “bbb+” and revised the outlook to positive from stable of Talanx AG as well as affirmed the debt rating of “bbb” on the EUR 350 million junior subordinated fixed to floating rate notes, due 2025 issued by Talanx AG. The outlook for all the above FSRs is stable.
The ratings of HDI-Gerling Lebensversicherung AG, a Group company, remain unchanged.
The positive outlook reflects the successful completion of the Talanx AG initial public offering (IPO) on 1 October 2012. The Group managed to raise approximately EUR 517 million in funding, assuming the full execution of the over allotted shares (the ‘greenshoe option’), as well as convert the EUR 300 million Meiji Yasuda Life Insurance Company’s convertible bond into equity. The financial flexibility of the Group has been a concern in the past due to HDI V.a.G’s mutual status. However, A.M. Best believes that the recent IPO constitutes a positive rating driver. The proceeds of the IPO are to be used to fund both organic and inorganic growth, and A.M. Best will monitor the success of these strategies over the next 12-36 months as well as their effect on the Group’s risk-adjusted capitalisation, which continues to be excellent at half-year 2012.
Upward rating actions could occur if the Group were to improve its risk-adjusted capitalisation, operating technical performance and business profile within its target emerging markets. The successful integration of the recent Towarzystwo Ubezpieczeñ Europa SA (TU Europa Group) and Towarzystwo Ubezpieczen i Reasekuracji Warta S.A. (Warta Group) transactions may also put upward pressure on the ratings.
Negative rating actions could occur if there were a significant deterioration in the Group’s risk-adjusted capitalisation, possibly driven by large losses in its exposure to eurozone debt. Poor execution and integration of the Group’s mergers and acquisitions strategy may also put negative pressure on the ratings.
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. Key criteria utilised include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding Universal BCAR”; “Understanding BCAR for Property/Casualty Insurers”; “Rating Members of Insurance Groups”; and “Insurance Holding Company and Debt Ratings”. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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