S&P Downgrades Hannover Re Unit

S&P Downgrades Hannover Re Unit

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

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

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

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

S&P also commented on Hannover Re's primary North American platform, Clarendon Insurance Group and its members: Clarendon National Insurance Co., Clarendon America Insurance Co., and Redland Insurance Co. (ICH is directly owned by Clarendon National Insurance Co.)

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

Hannover Re, based in Hanover, Germany, is the second-biggest German reinsurer behind Munich Re and is the fifth-largest in the world. Through subsidiaries, the company provides property-casualty, financial, life, and health reinsurance products worldwide.