A.M. Best Co. announced that it has affirmed the financial strength rating of ‘A’ (Excellent) of International Insurance Company of Hannover Limited (Inter-Hannover), the London-based general insurer and reinsurer, which is a subsidiary of Germany’s Hannover Re. It has assigned the company a “stable” rating outlook.
Best said the rating reflects the “company’s strategic importance to its ultimate parent,” Hannover Re, which is currently rated ‘A+’ (Superior) by Best, but which has been placed “under review with negative implications.” It also singled out Inter-Hannover’s “excellent prospective capitalisation and financial performance and very good business profile,” as additional factors supporting the rating.
Best noted that “Inter-Hannover is strategically important to Hannover Re as its only platform for developing program business in the United Kingdom and Europe. In addition, the company fronts direct business for its parent on a 100% basis.”
Commenting on Inter Hannover’s level of prospective capitalization, Best said that “As a result of significant premium growth in recent years (40% increase in net premium income in 2002), capitalisation on a risk-adjusted basis is no longer commensurate with the current rating.” It expects the company’s level of capitalization to increase in 2003-04 through retained earnings, and indicated that the “maintenance of the rating is predicated on further funds being made available to return risk-adjusted capital to a level commensurate with the current A rating in the near term.”
Best said “The company has consistently generated pre-tax operating profits for the last seven years, although in 2002 there was a significant decline to a profit of GBP 517, 000 (USD 854, 084) (compared with GBP 9.6 million (USD 15.9 million) in 2001), largely a result of reserve strengthening.” It expects “the company’s performance to be excellent in 2003 due to an improvement in the operating expense ratio from 23% in 2002 as the company benefits from a reduction in the duplication of core insurance company operations.”
In conclusion the bulletin noted the company’s “very good business profile in the market for program business. The portfolio consists of London market and European insurance business (gross premiums of GBP119 million (USD 196.6 million) in 2002) developed through a number of carefully selected specialist underwriting agents. A portfolio of direct business (gross premiums of GBP 158 million (USD 261 million) in 2002) is also written on a 100% fronting basis for its parent company, Hannover Re.”
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