A.M. Best Affirms Credit Ratings of HDI Haftpflichtverband der Deutschen Industrie V.a.G., Talanx AG and Its Core Subsidiaries

LONDON--(BUSINESS WIRE)-- A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” of HDI Haftpflichtverband der Deutschen Industrie V.a.G. (HDI/Talanx group or the group) (Germany), the ultimate operating mutual parent company of Talanx AG (Germany), and a number of its insurance subsidiaries. A.M. Best also has affirmed the Long-Term ICR of “a-” of Talanx AG, the intermediate holding company for all HDI/Talanx group companies, and the Long-Term Issue Credit Rating (Long-Term IR) of a debt instrument issued by Talanx Finanz (Luxembourg) S.A., and guaranteed by Talanx AG. Additionally, A.M. Best has affirmed the Mexico National Scale Rating of “aaa.MX” of HDI-Gerling de México Seguros, S.A. (Mexico City, Mexico) (see related press release). The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed list of companies and debt instrument.)

The ratings reflect the group’s balance sheet strength, which A.M. Best categorises as very strong, as well as its strong operating performance, favourable business profile and appropriate enterprise risk management.

The HDI/Talanx group’s balance sheet strength is underpinned by risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), at the strongest level, as well as a conservative investment policy and good financial flexibility. The group’s capital position benefits from material soft capital elements, including unrealised investment gains and additional economic value from life operations, as well as from the group’s outstanding hybrid debt. A.M. Best expects the group’s prospective capital position to be supported by Talanx AG’s prudent strategic dividend distribution between 35% and 45% of net income (after tax and minorities, with retention sufficient to support future growth plans.

The group’s strong operating performance is supported by a track record of relatively stable underwriting profits and resilient investment income, which translated into a five-year (2013-2017) average return on equity of 9.7% (as calculated by A.M. Best). In 2017, the group reported a profit after-tax of EUR 1.29 billion, a reduction of 16% compared with the previous year (2016: EUR 1.54 billion). The lower result was mainly attributable to higher-than-budgeted losses stemming from 2017 natural catastrophes, which particularly affected the industrial and non-life reinsurance segments of the group. Furthermore, the weak technical earnings of the German retail lines depressed further the group’s underwriting profitability. The group’s technical performance continues to be reliant on the excellent earnings of the group’s reinsurance divisions. However, A.M. Best expects the strategic measures taken on underperforming business lines to translate into improved underwriting performance over the medium to long term.

With consolidated gross premium income of EUR 31.9 billion (excluding savings elements of premiums from unit-linked life and annuity insurance) in 2017, the group maintains a favourable business profile that is well-diversified between primary and reinsurance operations and enhanced by its very strong competitive position in the German industrial and reinsurance markets. A.M. Best expects the HDI/Talanx group’s expansion to remain limited in the short term, reflecting suppressed insurance demand in the group’s core markets and the persisting competitive conditions in the global reinsurance segment.

The FSR of A (Excellent) and the Long-Term ICRs of “a+” have been affirmed with a stable outlook for the following subsidiaries of HDI Haftpflichtverband der Deutschen Industrie V.a.G.:

• HDI-Gerling de México Seguros, S.A.
• HDI Global SE
• HDI Global Network AG
• HDI Global Insurance Company
• HDI Lebensversicherung AG
• HDI Specialty Insurance Company
• Talanx Reinsurance (Ireland) SE

The Long-Term IR of “bbb+” has been affirmed for the following:

Talanx Finanz (Luxembourg) S.A.—
-- EUR 500 million 8.367% subordinated fixed to floating rate notes, due 2042

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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A.M. Best

Borja Cubillo, +44 20 7397 0306

Financial Analyst

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Jonathan Harris, +1 908-439-2200, ext. 5771

Senior Financial Analyst

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Olga Rubo, +52 55 1102 2720, ext. 134

Associate Financial Analyst

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Christopher Sharkey, +1 908-439-2200, ext. 5159

Manager, Public Relations

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Jim Peavy, +1 908-439-2200, ext. 5644

Director, Public Relations

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Source: A.M. Best