S&P Lowers Ratings on Hannover Re’s U.S. Subs

May 22, 2006

Standard & Poor’s Ratings Services announced that it has lowered its counterparty credit and financial strength ratings on Insurance Corp. of Hannover (ICH) and Redland Insurance Co. to “A” from “A+”. S&P also lowered its counterparty credit rating on Praetorian Financial Group Inc. (PFG), an intermediate insurance holding company ultimately owned by Germany’s Hannover Rueckversicherung-AG (Hannover Re – rated AA-/Negative/–), to “BBB” from “BBB+.” S&P’s outlook on PFG and its operating subsidiaries is stable.

“The downgrades reflect our view that these entities are no longer strategically important to Hannover Re group,” explained S&P credit analyst Siddhartha Ghosh. “The ratings, nevertheless, reflect the continuing explicit support provided by the group, especially significant quota share reinsurance protection.”

S&P further explained that the stable outlook reflects its “expectation that PFG will be successful in the execution and integration of its current business plan including successful transfer of specialty business from Clarendon.

“In addition, we also expect PFG’s debt plus preferred leverage to be less than 25 percent and fixed-charge coverage to be at least 6x for the next two years. We also expect PFG’s consolidated operating companies capital adequacy ratio (CAR) to be more than 160 percent, the combined ratio to be less than 95 percent, and the pretax ROR to be 10 percent-12 percent during the next two years.”

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