Assets and shareholders’ equity

Rating of the Group and its major subsidiaries

In the year under review the Talanx Group and its companies again maintained their excellent or very good ratings from the international rating agencies Standard & Poor’s (S&P) and A. M. Best. It is important to distinguish between the “Insurer Financial Strength Rating”, which primarily assesses our ability to meet our obligations to our policyholders, and the “Issuer Credit Rating” or “Counterparty Credit Rating”, which provides investors with information from an independent source about a company’s credit quality in general.

Financial Strength Ratings of the Talanx Group and its subgroups

 

Standard & Poor’s

A. M. Best

 

Grade

Outlook

Grade

Outlook

Talanx Group 1)

   

A

Stable

Talanx Primary Group 2)

A+

Stable

   

Hannover Re subgroup 3)

AA–

Stable

A

Positive


1)
The designation used by A. M. Best for the Group is “Talanx AG and its leading non-life direct insurance operation and its leading life insurance operation”

2) This rating applies to the subgroup of primary insurers (the Talanx Group divisions of Industrial Lines, Retail Germany and Retail International) as well as its major core companies

3) This rating applies to Hannover Re and its major core companies. The Hannover Re subgroup corresponds to the Talanx Group division of Reinsurance

The financial stability of the Talanx Group (with respect to both the primary insurance sector and the reinsurance sector) is assessed by the rating agency A. M. Best as “Excellent”; with a rating of A it is placed in the second-best rating category. The outlook for the rating of the primary insurance sector is stable. The outlook for the rating of Hannover Re is assessed as positive in light of the company’s improved capitalization.

In the case of S&P, the Hannover Re subgroup is awarded a rating in the second-best rating category at AA– (“Very Strong”), while the Primary Group was placed within the third-best rating category with an A+ (“Strong”). The outlook for the ratings is assessed as stable in both cases.

The strong competitive position of both subgroups is highlighted by S&P as a particularly impressive strength. A. M. Best affirmed inter alia the very good capitalization of both subgroups, which even beat the rating agency’s expectations.

In 2010 another rating was added for a company belonging to the Talanx Group: HDI-Gerling Welt Service AG received its initial rating of A (Excellent) with a stable outlook from A. M. Best in December 2010. On the other hand, the S&P ratings of AA– awarded to Hannover Reinsurance (Dublin) Ltd. and E+S Reinsurance (Ireland) were withdrawn on account of their liquidation. The reason here was Hannover Re’s move to concentrate its business activities in Ireland at a single subsidiary, namely Hannover Reinsurance (Ireland) Ltd.

The financial strength ratings from the primary insurance sector are summarized in the following table:

Financial Strength Ratings of companies in the primary insurance sector

   

Standard & Poor’s

A. M. Best

Companies

Location

Grade

Outlook

Grade

Outlook

HDI Direkt Versicherung AG

Germany

A+

Stable

HDI-Gerling America Insurance Company

USA

A+

Stable

A

Stable

HDI-Gerling Firmen und Privat Versicherung AG

Germany

A+

Stable

HDI-Gerling Industrie Versicherung AG

Germany

A+

Stable

A

Stable

HDI-Gerling Lebensversicherung AG

Germany

A+

Stable

A

Stable

HDI-Gerling Welt Service AG

Germany

A+

Stable

A

Stable

neue leben Lebensversicherung AG

Germany

A+

Stable

HDI-Gerling Verzekeringen N. V. (Nederland)

Netherlands

A

Stable

HDI-Gerling Verzekeringen N. V./
HDI-Gerling Assurances S. A. (Belgie/Belgique)

Belgium

A

Stable

HDI Versicherung AG

Austria

A

Stable

PB Lebensversicherung AG

Germany

A

Stable

PBV Lebensversicherung AG

Germany

A

Stable

Targo Lebensversicherung AG

Germany

A

Stable

S&P defines the first seven companies listed in the table (shown against a grey background) as “core companies” of the Talanx Primary Group. This is also why they received the same rating. The other companies listed in the table are considered by S&P to be strategically significant participations and have therefore been awarded grades that are one notch lower. In the case of A. M. Best, all four companies analyzed by this agency received the same rating of A with a stable outlook.

Current ratings of Hannover Re subsidiaries are available on the Hannover Re website.

Issuer Credit Ratings of companies belonging to the Talanx Group

 

Standard & Poor’s

A. M. Best

 

Grade

Outlook

Grade 1)

Outlook

Talanx AG

A–

Stable

bbb+

Stable

Hannover Rückversicherung AG

AA–

Stable

a+

Positive


1)
In order to distinguish Financial Strength Ratings from Issuer Credit Ratings, A. M. Best uses lower-case script for the latter

This table provides an overview of the Issuer Credit Ratings (ICR). On the basis of the rating of A– (“Strong”), Talanx AG’s ability to pay is assessed by S&P as “Very Good”, hence corresponding to the third-best category on the issuer credit rating scale. A.M. Best rates the ability to pay of Talanx AG as bbb+ (“Good”), corresponding to the fourth-best rating category. The outlook of these ratings is assessed as stable by both rating agencies.

The somewhat inferior assessment of Talanx AG relative to the Financial Strength Ratings can be attributed to the methodology used by the rating agencies, under which a rating markdown is applied to holding companies. In other words, in accordance with the general analytical criteria used by the rating agencies, companies that exercise a purely holding function with no operational activities of their own are downgraded relative to the Financial Strength Rating that would be awarded to a comparable insurance undertaking.

Hannover Re is rated AA– (“Very Strong”) by S&P, equivalent to the second-best rating category. The outlook for this rating is stable. A. M. Best has awarded Hannover Re an Issuer Credit Rating of a+ (“Strong”), corresponding to the third-best rating category on the ICR rating scale used by A. M. Best. The outlook for Hannover Re’s ICR is – in keeping with its Financial Strength Rating – positive.

Various ratings also exist for the subordinated liabilities issued by Group companies (issue ratings). These ratings are set out in the explanatory notes on the consolidated balance sheet in subsection 17 “Subordinated liabilities” of the Notes.