Market Overview

A.M. Best Affirms Credit Ratings of HDI Haftpflichtverband der Deutschen Industrie V.a.G., Talanx AG and Its Core Subsidiaries

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A.M. Best has affirmed the Financial Strength Rating (FSR) of A
(Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of
"a+" of HDI Haftpflichtverband der Deutschen Industrie V.a.G.
(HDI/Talanx group or the group) (Germany), the ultimate operating mutual
parent company of Talanx AG (Germany), and a number of its insurance
subsidiaries. A.M. Best also has affirmed the Long-Term ICR of "a-" of
Talanx AG, the intermediate holding company for all HDI/Talanx group
companies, and the Long-Term Issue Credit Rating (Long-Term IR) of a
debt instrument issued by Talanx Finanz (Luxembourg) S.A., and
guaranteed by Talanx AG. Additionally, A.M. Best has affirmed the Mexico
National Scale Rating of "aaa.MX" of HDI-Gerling de México Seguros, S.A.
(Mexico City, Mexico) (see related press
release
). The outlook of these Credit Ratings (ratings) is stable.
(See below for a detailed list of companies and debt instrument.)

The ratings reflect the group's balance sheet strength, which A.M. Best
categorises as very strong, as well as its strong operating performance,
favourable business profile and appropriate enterprise risk management.

The HDI/Talanx group's balance sheet strength is underpinned by
risk-adjusted capitalisation, as measured by Best's Capital Adequacy
Ratio (BCAR), at the strongest level, as well as a conservative
investment policy and good financial flexibility. The group's capital
position benefits from material soft capital elements, including
unrealised investment gains and additional economic value from life
operations, as well as from the group's outstanding hybrid debt. A.M.
Best expects the group's prospective capital position to be supported by
Talanx AG's prudent strategic dividend distribution between 35% and 45%
of net income (after tax and minorities, with retention sufficient to
support future growth plans.

The group's strong operating performance is supported by a track record
of relatively stable underwriting profits and resilient investment
income, which translated into a five-year (2013-2017) average return on
equity of 9.7% (as calculated by A.M. Best). In 2017, the group reported
a profit after-tax of EUR 1.29 billion, a reduction of 16% compared with
the previous year (2016: EUR 1.54 billion). The lower result was mainly
attributable to higher-than-budgeted losses stemming from 2017 natural
catastrophes, which particularly affected the industrial and non-life
reinsurance segments of the group. Furthermore, the weak technical
earnings of the German retail lines depressed further the group's
underwriting profitability. The group's technical performance continues
to be reliant on the excellent earnings of the group's reinsurance
divisions. However, A.M. Best expects the strategic measures taken on
underperforming business lines to translate into improved underwriting
performance over the medium to long term.

With consolidated gross premium income of EUR 31.9 billion (excluding
savings elements of premiums from unit-linked life and annuity
insurance) in 2017, the group maintains a favourable business profile
that is well-diversified between primary and reinsurance operations and
enhanced by its very strong competitive position in the German
industrial and reinsurance markets. A.M. Best expects the HDI/Talanx
group's expansion to remain limited in the short term, reflecting
suppressed insurance demand in the group's core markets and the
persisting competitive conditions in the global reinsurance segment.

The FSR of A (Excellent) and the Long-Term ICRs of "a+" have been
affirmed with a stable outlook for the following subsidiaries of HDI
Haftpflichtverband der Deutschen Industrie V.a.G.:

  • HDI-Gerling de México Seguros, S.A.
  • HDI Global SE
  • HDI Global Network AG
  • HDI Global Insurance Company
  • HDI Lebensversicherung AG
  • HDI Specialty Insurance Company
  • Talanx Reinsurance (Ireland) SE

The Long-Term IR of "bbb+" has been affirmed for the following:

Talanx Finanz (Luxembourg) S.A.—
-- 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 A.M. 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 A.M. Best's
Recent
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Understanding
Best's Credit Ratings
. For information on the proper media
use of Best's Credit Ratings and A.M. Best press releases, please view
Guide
for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating
Action Press Releases
.

A.M. Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit
www.ambest.com
for more information
.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

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