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Best’s News & Research Service - December 15, 2022 11:16 AM (EST)

AM Best Upgrades Credit Ratings of HDI Haftpflichtverband der Deutschen Industrie V.a.G. and Its Rated Insurance Subsidiaries

  • December 15, 2022 11:16 AM (EST)
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Amsterdam //BestWire// - AM Best has upgraded the Financial Strength Rating to A+ (Superior) from A (Excellent) and the Long-Term Issuer Credit Ratings to “aa-” (Superior) from “a+” (Excellent) of HDI Haftpflichtverband der Deutschen Industrie V.a.G. (HDI V.a.G.) (Germany) and its rated insurance subsidiaries. AM Best has also upgraded the Long-Term Issue Credit Rating (Long-Term IR) to “a+” (Excellent) from “a” (Excellent) of a debt instrument issued by Talanx Finanz (Luxembourg) S.A., and guaranteed by Talanx AG (Germany). Talanx AG is the intermediate operating holding company for all HDI V.a.G. group companies, which combined form the Talanx Group (see below for a detailed list of companies and the debt instrument). The outlook of these Credit Ratings (ratings) has been revised to stable from positive. Additionally, AM Best has affirmed the Mexico National Scale Rating of “aaa.MX” (Exceptional) of HDI Global Seguros, S.A. (Mexico City, Mexico). The outlook of this rating is stable.

The ratings of HDI V.a.G. reflect its balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, favourable business profile and appropriate enterprise risk management.

The rating upgrades for HDI V.a.G. reflect a consistent strengthening of balance sheet fundamentals over the past few years, underpinned by a prudent risk culture and strong and stable operating performance. Incremental improvements in the profitability of the group’s primary business segment have strengthened capital generation and continue to support the resilience of its balance sheet strength.

AM Best expects HDI V.a.G.’s consolidated risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), to be maintained at the strongest level, supported by strong earnings generation and a prudent capital management approach. The group’s asset-liability and liquidity management capabilities are expected to help it to withstand current external headwinds associated with financial market volatility and uncertain macroeconomic prospects. Financial leverage and coverage ratios are supportive of the group’s balance sheet strength assessment, and financial flexibility is considered excellent due to its good access to capital markets. In addition, the group focuses on further enhancing its prudent reserving approach and is taking actions as needed to account for current inflationary pressures.

HDI V.a.G. and the Talanx Group have a track record of relatively strong and stable operating performance, demonstrated by a solid five-year (2017-2021) weighted average return on equity (ROE) of 8.3% and 9.2% respectively, as calculated by AM Best. The Talanx Group reported an ROE of 11.5% at the third quarter of 2022. AM Best sees improving earnings diversification with increasing contributions from primary segments, underpinning robust overall group income. The group’s industrial lines and retail Germany segments continue to demonstrate a clear overall trend of underlying underwriting improvements, resulting from successful restructuring measures, pricing actions and prudent risk selection. The group’s resilient investment income also continues to provide a significant source of income.

HDI V.a.G. benefits from a strong franchise and leading position in its core markets. Gross written premium has grown by an average annual rate of 8.3% over the past five years (2017-2021), as calculated by AM Best, reaching EUR 44.5 billion in 2021, excluding savings elements of premiums from unit-linked life insurance. This growth is supported by good diversification of primary and reinsurance operations and enhanced by its very strong competitive position in the global reinsurance market and the German industrial segment.

HDI V.a.G benefits from a strong risk culture across the group that is underpinned by an embedded risk framework and sound risk controls.

The FSR has been upgraded to A+ (Superior) from A (Excellent) and the Long-Term ICR to “aa-” (Superior) from “a+” (Excellent), with the outlook revised to stable from positive, for the following subsidiaries of HDI V.a.G.:

  • Talanx AG

  • HDI Global Seguros, S.A.

  • HDI Global SE

  • HDI Global Specialty SE

  • HDI Global Network AG

  • HDI Global Insurance Company

  • HDI Lebensversicherung AG

  • HDI Specialty Insurance Company

  • HDI Reinsurance (Ireland) SE

The following Long-Term IR has been upgraded with the outlook revised to stable from positive:

Talanx Finanz (Luxembourg) S.A. —

— to “a+” (Excellent) from “a” (Excellent) on EUR 500 million 8.367% subordinated fixed to floating rate notes, due 2042.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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