Standard & Poor’s has upgraded the rating of non-life reinsurance company, Hannover Reinsurance Africa (Ltd) from BBB+ to A with a stable outlook.
Standard & Poor’s indicated that the upgrade was resultant from several key factors. Hannover Re Africa has become a strategically important member of the Hannover Re Group. This is reflected in the parental support embodied within the intragroup retrocession provided to the South African entity by its parent, and the close strategic, operational and financial integration of Hannover Re Africa in a group context.
The upgrade in rating also reflects the company's standalone features which include strong capitalization and good operating performance.
The ratings agency noted that Hannover Re Africa has successfully completed a transition begun at the beginning of 2002, when the existing management team took charge. The company has since reconfigured its underwriting profile and begun to build a track record of consistently good earnings. The company is one of the major reinsurers in the South African reinsurance market.
Despite the extreme turbulence in current financial markets, Hannover Re Africa remains in a strong position to meet market needs expected to arise in 2009. The company’s standalone capital adequacy is expected to prove resilient to the realized investment losses it has incurred, particularly in respect of its equity portfolio, as a result of the uncertainty seen this year in global financial markets.
Operating performance is considered good, both currently and prospectively. 2007 was another a successful year for the company, with a combined ratio of 98% (94% in 2006) and ROE of 21% (19% in 2006) reported.
Although S&P indicated residual concerns surrounding the delegated underwriting model that is favoured by Hannover Re Africa, which might carry a heightened level of inherent risk - it also noted that strong risk controls, and close alignment of economic interest between Hannover Re Africa and its underwriting agencies contributes to alleviating these concerns.
Commenting on the report, CEO of Hannover Re: Africa Achim Klennert (pictured above) said: “We are pleased with the performance of the local entity in these challenging times. In a year in which high loss activity and financial turmoil has affected the entire market, Hannover Re Group (Africa) remains a strong and committed partner to the insurance industry and will continue to contribute to the availability of secure and viable insurance in the region.”
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