Ratings Roundup: Bond Safeguard, Lexon, Gerling US

December 12, 2007

Standard & Poor’s Ratings Services has revised its outlook on Bond Safeguard Insurance Co. and Lexon Insurance Co. to negative from stable. S&P also affirmed its ‘BBB-‘ counterparty credit and financial strength ratings on these companies. “The outlook revision reflects our view that the companies face a heightened threat of earnings and revenue disruptions because of their significant exposures related to the housing market, as about half of the companies’ combined surety book is for subdivision projects” explained S&P credit analyst Julie Herman. “Subdivision bonds guarantee that the developer will construct infrastructure improvements related to new home development (such as pavement, sidewalks, street lighting, sewers, etc.) that the local municipality requires,” S&P noted. “The heightened systemic risk the companies face stemming from the unfavorable housing market conditions is highlighted by the deteriorated financial strength of several of the companies’ subdivision clients, with a few of these clients currently in bankruptcy and several recently downgraded by Standard & Poor’s.”

Standard & Poor’s Ratings Services has assigned its ‘A+’ long-term counterparty credit and insurer financial strength ratings to HDI-Gerling America Insurance Co. (HG-America) with a stable outlook. “The ratings reflect the classification of the company, which is fully owned by Germany-based HDI-Gerling Industrie Versicherung AG (HG-Industrie AG; A+/Stable/–) as core to Talanx AG (A-/Stable/–), the parent company of Talanx Primary Group (TPG),” said S&P. Credit analyst Johannes Bender explained that in S&P’s view “HG-America is integral to TPG’s strategy to maintain its strong competitive position in international programs with its globally operating European industrial line customers. He added that “the stable outlook reflects that on the core primary operating entities of TPG.”

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