Fitch says Hannover Re Stable

Fitch Ratings has revised Hannover Re’s outlook to Stable from Negative. It confirmed it and its reinsurer subsidiary’s Insurer Financial Strength (IFS) ratings at 'A+' and Hannover Re's Issuer Default Rating (IDR) at 'A+'.

“The outlook revision reflects the strong improvement in Hannover Re's capital adequacy in 2009 and the group's strong operating performance, although the agency notes this was supported by a benign catastrophe environment and two significant one-off effects,” Fitch said.

“Fitch views Hannover Re's exposure to credit reinsurance as manageable in the context of a diversified portfolio of risks and notes the conservative composition of the group's investment portfolio with minimal appetite for equity risk at present.

Reduced exposure

“The agency also notes Hannover Re's reduced exposure to counterparty risk which has been achieved by increasing levels of net retention, and the group's activities in reducing its exposure to peak catastrophe zones.

“Fitch believes that the strong growth exhibited by Hannover Re in 2009 could impact earnings negatively if premium rates prove inadequate for the areas in which the group has expanded.

“Hannover Re has higher levels of premium and investment leverage than some peers which increases the likelihood of earnings volatility over the course of the cycle. In addition, debt leverage is slightly higher than the peer group, although Fitch believes it is not unreasonable for the current rating level.”