S&P Raises Ratings on German Insurer VHF to “A”; Off CreditWatch

Standard & Poor’s Rating Services announced that it has “raised to ‘A’ from ‘A-‘ its long-term counterparty credit and insurer financial strength rating on Germany-based car and property/casualty insurer, VHV Allgemeine Versicherung AG, (VHV Allgemeine), previously known as VHV Deutsche Kautionsversicherung AG (DK). At the same time, the ratings on VHV Allgemeine/DK were removed from CreditWatch positive, where there they had been placed on July 21, 2005.” The outlook on all the ratings is stable.

S&P also affirmed the “A” long-term counterparty credit and financial strength ratings on VHV Vereinigte Hannoversche Versicherung a.G. (VHV aG) with a stable outlook; and withdrew its ratings on VHV Autoversicherung-AG.

“The rating action follows the VHV group’s successful consolidation of its non-life operations into VHV Allgemeine to simplify operations and to increase capital efficiency,” stated S&P credit analyst Roland Nobs.

S&P noted: “Effective retroactively Jan. 1, 2005, the move includes the merger of core entity VHV Autoversicherung-AG (VHV Auto) as well as the transfer of almost all non-life insurance business from core group entity VHV aG. All relevant internal and external bodies have agreed to the restructuring. Since the completion of the restructuring, the new entity, VHV Allgemeine, is now being viewed as core to the VHV group, whereas the former entity, DK, had been considered strategically important, a primary factor for the one-notch upgrade.”

S&P explained: “VHV aG remains the group’s ultimate holding company and, via coinsurance agreements with VHV Allgemeine, continues to serve the group’s key client segment, the construction industry, thereby preserving the group’s historical corporate culture as a mutual insurer.”

“The affirmation of the ratings on VHV aG reflect Standard & Poor’s view that the company remains a core part of the group,” Nobs added. “In addition, Standard & Poor’s does not expect any material impact on the group’s overall financial strength.”

The ratings on VHV Auto were withdrawn at the request of VHV group because of the complete transfer of its entire activities (all assets and liabilities) to VHV Allgemeine and as it has ceased operations.

“The stable outlook is based on Standard & Poor’s expectation that management will achieve further progress in translating the company’s improved diversification into respective earnings,” Nobs explained.

S&P said it “expects gross non-life combined ratios to be less than 100 percent and ROR to be about 7 percent in both 2005 and 2006. In addition, capitalization is expected to remain very strong in 2005.”