Moody's Upgrade Possible For Hannover Re
NU Online News Service, Dec. 15, 3:32 p.m. EST?The London office of Moody's Investors Service said yesterday that it had placed the Baa1 financial strength ratings of members of the Hannover Re Group on review for possible upgrade to A3.[@@]
Should the upgrade of the German reinsurer take place, it would mark the second recent upward rating change from Moody's for a large reinsurer. Last week, Moody's announced that it was upping Paris-based SCOR's financial strength rating to Baa2 from Baa3.
According to Moody's, Hannover Reinsurance Company (Hannover Re) is currently rated Baa1 for insurance financial strength, while its subsidiaries E+S R?ckversicherungs-AG and Hannover Finance Inc. (guaranteed by Hannover Re) are respectively rated Baa1 for insurance financial strength, and Ba1 for subordinated debt.
Moody's said that the rating review follows the continued improvement in Hannover Re's financial profile, most notably the reduction in operating leverage and increase in shareholders' equity.
The rating agency said that its rating review would focus on Hannover Re's year-end 2004 performance, and specifically on operating factors including reinsurance recoverables, reserving levels, and any potential impact from the New York attorney general's investigation into financial reinsurance transactions.
Moody's said that in the absence of any unexpected adverse developments from the 2004 results, it is not only likely that the rating agency will push Hannover Re's financial strength rating up to A3, but that it will also reconsider the current magnitude of the difference between the financial strength and debt rating.
As for SCOR, while the financial strength rating still remains in the "B"-range, on Dec. 7, Moody's announced that it had upgraded the financial strength rating to Baa2, and that it also increased various debt ratings.
Moody's said that the upgrades reflect SCOR's improving solvency and the reinsurer's return to profitability during 2004 as factors prompting the upgrades. Other justifications for the rating action included the active management of discontinued business, management's strong focus on profitability and capital enhancement as embodied in the Group's "Moving Forward" Plan, a resilient franchise, and improved financial flexibility.
Moody's also said it believes that SCOR continues to enjoy strong shareholder support.
According to Moody's, SCOR had total shareholders' equity of 1.560 billion euros, or roughly $2 billion as of Sept. 30, and gross written premiums of around two billion euros ($2.66 billion) for the nine months ended Sept. 30.
The larger Hannover Re, based in Hannover, Germany, had reported shareholders' equity of around 2.5 billion euros (over $3 billion) and gross written premiums of around 7 billion euros (about $9 billion) for the same nine-month period.
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