S&P Assigns ‘BBB+’ Rating to Germany’s VHV Holding

Standard & Poor’s Ratings Services announced that it has assigned its “BBB+” long-term counterparty credit rating to Germany’s VHV Holding with a stable outlook.

S&P said: “The rating reflects VHV Holding’s role as the intermediate holding company for the VHV insurance group (core operating entities rated A/Stable/–), a midsize German composite insurance group.”

“The rating is further based on the strong earnings performance of VHV Holding’s operating subsidiaries, strong liquidity, strong coverage ratios, and very conservative leverage ratios relative to the rating,” stated S&P credit analyst Roland Nobs. “Together these factors contribute toward the group’s strong financial flexibility (defined as the ability to source capital relative to capital requirements),” the bulletin continued.

S&P explained that the “two-notch differential between the ratings on the holding company and the ratings on the operating entities reflects the structural subordination of VHV Holding to the policyholders of its operating subsidiaries. VHV Holding has no operating characteristics in its own right, and therefore solely relies on profit transfer from its subsidiaries to service debt.”

Nobs indicated that the “stable outlook reflects Standard & Poor’s expectation that VHV Holding will maintain its sound liquidity profile, and will continue to benefit from strong operating results from its operating subsidiaries.” VHV Holding is expected to benefit from increased profit transfers translating into leverage and coverage ratios, which are at least commensurate with the current rating.