S&P Raises VHV Ratings to ‘A’

Standard & Poor’s Ratings Services announced that it has raised its long-term counterparty credit and insurer financial strength ratings to “A” from “A-” on VHV Vereinigte Hannoversche Versicherung a.G. (VHV a.G.) and VHV Autoversicherung-AG (VHV Auto), which are core members of Germany-based mutual group Vereinigte Hannoversche Versicherung (VHV group). S&P also announced that the “ratings on strategically important Hannoversche Lebensversicherung AG (HL) were raised to ‘A-‘ from ‘BBB+’.” The outlooks on all ratings are stable.

“The upgrades are based on further significant improvements of HL in regaining its historical competitive and operating strengths, as well as the continued demonstration of strong operating performance by the non-life operations of the group,” stated S&P credit analyst Wolfgang Rief.

S&P said “the ratings on VHV a.G. and VHV Auto are based on the companies’ core status within the VHV group, whereas HL is considered strategically important. Further rating factors are the overall VHV group’s strong competitive position and very strong capitalization.”

Despite HL’s recovery, S&P said it “now expects the company to demonstrate sustained success in the active management of the challenges of the changing environment in the German life insurance market.”

“The stable outlook is based on Standard & Poor’s expectation that management will achieve further progress in translating the group’s improved diversification into respective earnings,” Rief continued.

S&P also noted: “The current structural change in the German life insurance market is challenging, but HL is expected to benefit from competitive products, its cost efficiencies, and a loyal clientele.” However S&P expects “non-life combined ratios to be less than 100 percent and ROR to be about 7 percent in both 2005 and 2006. HL is expected to report 2005 premium levels similar to those seen in 2004 and a pretax pre-distribution ROA of about 1.7 percent, with at least similar levels in 2005. Group capital adequacy is expected to remain very strong in 2005.”