A.M. Best Places Rating of HDI Haftpflichtverband der Deutschen Industrie, Core Subsidiary Under Review

April 14, 2003

A.M. Best Co. has placed the financial strength rating of A+ (Superior) of HDI Haftpflichtverband der Deutschen Industrie (HDI) and its core subsidiary, HDI Reinsurance (Ireland) Limited, under review with negative implications.

The under review status reflects A.M. Best’s assessment of HDI’s current and prospective consolidated risk-adjusted capitalization, in particular for its reinsurance subsidiary, Hannover Re. HDI’s consolidated premiums grew by a very strong 10.6 percent to EUR 16.1 billion (USD 17.2 billion) in 2002, and A.M. Best expects further growth in 2003, albeit on a smaller scale. Although consolidated shareholders’ equity (including minority interest) has increased due to retained earnings at year-end 2002, A.M. Best believes that further funds will be required to sustain growth in 2003 in all business units, in particular reinsurance. However, HDI’s financial flexibility is constrained due to its mutual status.

The current rating recognises HDI’s significantly improved underwriting performance in non-life with an expected combined ratio of 90.3 percent in 2002, and its very strong business position in industrial insurance, where it is one of the market leaders in Germany.

A.M. Best intends to resolve the under review status shortly.

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