A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and the issuer credit rating (ICR) of “a+” of UK-based International Insurance Company of Hannover Limited (Inter Hannover), both with positive outlooks.
Best explained that the positive outlook [a rather rare occurrence for EU insurers these days] reflects the “positive outlook on the ratings of its parent company, Hannover Rueckversicherung AG (Hannover Re). Inter Hannover remains important to its parent as a source of primary insurance business. In addition, the company benefits from explicit parental support in the form of quota share reinsurance of both its single risk and agency business.”
Best added that the ratings “reflect Inter Hannover’s stand-alone risk-adjusted capitalization, which is expected to remain excellent, supported by premium retention of below 10 percent. In the past, Inter Hannover has had to strengthen the reserves associated with the run-off of a number of its poorly performing agency accounts.
“However, the conclusion in October 2011 of a part VII transfer to a third party of the liabilities of these run-off accounts has eliminated further capital strain to Inter Hannover from this source. These liabilities were reinsured to third parties in 2010, before being transferred in 2011.”
Best also indicated that a “positive, albeit lower, pre tax profit is expected in 2011 (2010: £15 million, [$24 million] excluding the impact of the reinsurance of run-off accounts).
“In spite of the weaker performance of a number of agency accounts, the combined ratio is likely to remain low, supported by commission income from Hannover Re on ceded business. Income from the company’s conservative investment portfolio is expected to decline, reflecting a reduction in invested assets following the part VII transfer and the lower interest rate environment.”
In addition Best pointed out that “Inter Hannover’s business profile benefits from its links with Hannover Re, and integration between the business units of the two entities continues to increase. Inter Hannover writes large commercial single risks through its London and Scandinavian branches as well as agency business, which is focused on small commercial and personal lines business written primarily through European agencies and brokers.
“In 2011, gross premium growth is expected to emanate from agency business and the development of classes within the single risk portfolio. Substantially all single risk business and a large proportion of agency business is ceded to Hannover Re.”
Source: A.M. Best – Europe
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