S&P Maintains Hannover Re Ratings, But Lowers Outlook

April 30, 2000

Standard & Poor’s, while affirming Hannover Re’s overall ratings of AA- or better, revised its outlook from stable to negative, reflecting concerns over the German reinsurer’s rapid rate of growth.

“The outlook revision reflects some concerns regarding the group’s risk-based capitalization, which, although still very strong, has been diluted in recent years, Further rating factors are the group’s very strong global business position and very strong earnings, offset by diminished financial flexibility,” the announcement said.

“Hannover Re will maintain an excellent market position, benefiting from the rapid expansion in its life portfolio, and from the first-time inclusion of the U.S.-based program writer, Clarendon Insurance Group. This change in business mix will also enhance underlying earnings, which are expected to stabilize from 2000. Although this should help Hannover Re recapture its former balance-sheet strength, there are some concerns that the very strong volume growth will outpace earning development, there by putting pressure on the group’s capital strength,” the announcement continued.

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