A.M. Best Affirms Ratings of HDI Haftpflichtverband der Deutschen Industrie V.a.G. and Talanx AG

LONDON--(BUSINESS WIRE)-- A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of “a+” of HDI Haftpflichtverband der Deutschen Industrie V.a.G. (HDI V.a.G.) (Germany), the ultimate operating mutual parent company of Talanx AG (Germany) and its various insurance subsidiaries. Concurrently, A.M. Best has affirmed the Mexico National Scale Rating of “aaa.MX” of HDI-Gerling de México Seguros, S.A. (Mexico City, Mexico). A.M. Best also has affirmed the ICR of “a-” of Talanx AG, the intermediate holding company for all HDI V.a.G. companies (collectively referred to as the Talanx Group). Additionally, the ratings of the main operating subsidiaries of the group, as well as the issue ratings on debt instruments guaranteed by Talanx AG, have been affirmed. The outlook for each rating is stable. (Please see below for a detailed listing of the companies and ratings.)

The ratings reflect Talanx Group’s strong consolidated risk-adjusted capitalisation, solid operating performance and strong business profile within its core European life and non-life markets.

Talanx Group’s strong consolidated risk-adjusted capitalisation is supported by a good level of retained earnings and soft capital components that include unrealised investment gains, the value of life in-force business (an embedded value concept) and hybrid debt. The group targets a dividend pay-out ratio of between 35% and 45% of net profit after tax, thereby allowing internal capital generation to support the group’s business growth strategy.

Talanx’s solid operating performance remains largely supported by the strong results of the reinsurance division, which have benefited for a number of years from low catastrophe activity, as well as good earnings derived from the retail international portfolio. Results from these business divisions continue to offset the weaker performance of the group’s other segments, which in recent years have been affected by a spate of large losses in the industrial lines portfolio and reserve strengthening within certain lines of German retail business. Additionally, the German life account continues to be affected by low interest rates, which have resulted in more burdensome regulatory capital requirements and the write-down in the value of the life in-force business.

In 2015, Talanx Group announced its intention to cease actively selling traditional, classic life insurance business through its German life carriers and to focus on the provision of capital-efficient offerings from 2016. Subsequently, actions taken to reorganise the life and non-life Retail Germany division and to realign its life business strategy led to EUR 155 million write-off of goodwill. Nonetheless, the group produced a strong pre-tax profit of EUR 2.0 billion in 2015 compared with EUR 1.7 billion in the previous year.

With gross premium income of EUR 32 billion in 2015, Talanx AG maintains a good business profile that is broadly diversified between primary and reinsurance operations and enhanced by its strong competitive positions within the Germany industrial and international reinsurance markets. A.M. Best expects growth prospects to be limited in the near term, owing to from the impact of suppressed insurance demand, intense competitive conditions of the global reinsurance markets and the low interest rate environment.

The FSR of A (Excellent) and the ICRs of “a+” have been affirmed with the 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
• Talanx Reinsurance (Ireland) Public Limited Company

The issue rating has been affirmed at “bbb+” 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 rating(s) 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.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2016 by A.M. Best Rating Services, Inc. ALL RIGHTS RESERVED.

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A.M. Best

Fahim Awan, +44-20-7397-0315

Financial Analyst

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Elí Sánchez, +52-55-1102-2720, ext. 108

Senior 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

Assistant Vice President, Public Relations

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Source: A.M. Best