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FOR IMMEDIATE RELEASE
LONDON - AUGUST 17, 2017 11:35 AM (EDT)
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 V.a.G.) (Germany), the ultimate operating mutual parent company of Talanx AG (Germany), and various insurance subsidiaries (collectively referred to as the HDI / Talanx group or the group). 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) (see related press release). 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. Additionally, the Credit Ratings (ratings) of the main rated operating subsidiaries of the group, and the Long-Term Issue Credit Ratings (Long-Term IR) on debt instruments guaranteed by Talanx AG have been affirmed. The outlook of these ratings is stable. A.M. Best also has assigned an FSR of A (Excellent) and a Long-Term ICR of “a+” to HDI Specialty Insurance Company (Chicago, IL), an operating subsidiary of the group. The outlook assigned to these ratings is stable. (See below for a detailed list of companies and debt instruments.)
The ratings reflect the group’s strong risk-adjusted capitalisation, solid operating performance and excellent business profile within its core European life and non-life markets.
The group’s strong risk-adjusted capitalisation is supported by a track record of earnings retention, as well as soft capital components that include unrealised investment gains, the value of in-force life business and subordinated debt issuances. The group targets a dividend payout ratio of between 35% and 45% of annual net profit after tax, which enables robust internal capital generation to support business expansion.
The group has a track record of reporting solid operating performance, evidenced by return on equity ratios above 10% over the past five years (2012-2016). For 2016, the group generated a pre-tax operating profit of EUR 2.1 billion compared with EUR 2.0 billion in 2015. The solid 2016 result largely reflects the excellent performance of the group’s reinsurance division, which benefited from low catastrophe activity. Earnings from this division continue to offset the weaker performance of the group’s other segments, which in recent years have been affected by elevated large losses from industrial lines business and by reserve strengthening for certain German retail lines. Additionally, the German life division continues to be affected by low interest rates, which have led to more burdensome regulatory capital requirements and the accelerated write-down in the value of the life in-force business.
During 2016, the group ceased selling the bulk of its traditional life insurance products in its core market of Germany, as they had become increasingly capital intensive and underperforming, with a subsequent shift toward offering capital-light life products. As part of this transition, the group is reorganising its Germany retail life division and in 2015 wrote down some goodwill related to German life business.
With a combined gross premium income of EUR 29.9 billion in 2016, the group maintains an excellent business profile that is well-diversified between primary and reinsurance operations and enhanced by its very strong competitive position in German industrial and reinsurance markets. A.M. Best expects limited growth from the group over the short term, reflecting the impact of suppressed insurance demand, persistent competitive conditions in the global reinsurance marketplace and the low interest rate environment.
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.:
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.
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