The Frankfurt office of Standard & Poor’s Ratings Services has issued a comment following Hannover Re’s 9-month earnings report (See IJ Web site Nov. 10), indicating that the company and its largest shareholder, German insurer Talanx AG, will remain on CreditWatch with negative implications.
Specifically S&P said: “The ‘A’ counterparty credit and senior unsecured debt ratings on Talanx AG and ‘AA-‘ counterparty credit and insurer financial strength ratings on the group’s core primary insurance entities (collectively referred to as Talanx) remain on CreditWatch with negative implications, where they were placed on Nov. 7, 2005.
“The update follows the Hannover Re group’s recent announcement that it has significantly revised its loss estimates for hurricanes Katrina and Rita. Talanx AG holds a 51 percent stake in the Hannover Re group. The ratings on the Hannover Re group, which were placed on CreditWatch with negative implications on Nov. 10, 2005, as a result of the group’s announcement, also remain on CreditWatch with negative implications. The action on Hannover Re, which correspondingly affects Talanx, reflects Standard & Poor’s concerns about potential material risk management deficiencies within the whole group.”
S&P indicated that it “expects to resolve this CreditWatch placement within 90 days. On resolution of the CreditWatch status of Hannover Re, the ratings on Hannover Re will either be affirmed or lowered, but not by more than one notch. The circumstances that would result in a downgrade include material deficiencies in risk management and controls.”
“If resolution of the Hannover Re CreditWatch placement results in a downgrade, the ratings on Talanx may also be lowered,” noted S&P credit analyst Hiltrud Besgen. “However, independent of this resolution, Talanx AG and its related primary insurance subsidiaries will remain on CreditWatch negative pending further information on the impact of its proposed acquisition of the financially weaker Gerling primary insurance operations,” she added.
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