S&P Downgrades Hannover Re Unit

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NU Online News Service, April 8, 4:13 p.m.EDT?Standard & Poor's Ratings Services announced thelowering of counterparty credit and financial strength rating onthe Insurance Corp. of Hannover (ICH), a unit of Hannover Re, to"triple-B-plus' from "A." with a "stable" outlook.

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The main reason for the downgrade, S&P said, is ICH's weakoperating performance, which the rating agency does not expect toimprove significantly this year.

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According to New York-based S&P, ICH also suffers fromadditional negative factors, including reserve deficiencies,uncertainties about the unit's business position created by ashifting business model and the ongoing restructuring.

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"ICH has significantly altered its business model in 2002,"S&P stated. Historically, the unit wrote assumed reinsurancecrop, workers' comp, and nonstandard auto insurance as well asprogram business. Next year, however, all of ICH's new businesswill be program business.

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S&P also commented on Hannover Re's primary North Americanplatform, Clarendon Insurance Group and its members: ClarendonNational Insurance Co., Clarendon America Insurance Co., andRedland Insurance Co. (ICH is directly owned by Clarendon NationalInsurance Co.)

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The rating agency said the 'double-A-minus' counterparty creditand financial strength ratings on CIG remain on CreditWatch withnegative implications because of concerns about Hannover Re. Theratings on Hannover Re are also on CreditWatch, S&P said,because of the company's quality of capital and constrainedfinancial flexibility.

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Hannover Re, based in Hanover, Germany, is the second-biggestGerman reinsurer behind Munich Re and is the fifth-largest in theworld. Through subsidiaries, the company providesproperty-casualty, financial, life, and health reinsurance productsworldwide.

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