A.M. Best Affirms Ratings of HDI Haftpflichtverband der Deutschen Industrie V.a.G. and Talanx AG

A.M. Best Europe Rating Services Limited has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of "a" of HDI Haftpflichtverband der Deutschen Industrie V.a.G. (HDI V.a.G.), the ultimate mutual parent company of Talanx AG,and various subsidiaries. The outlook for the ICR remains positive, while the outlook for the FSR is stable.

Concurrently, A.M. Best has affirmed the ICR of "bbb+" and the debt rating of Talanx AG, which is the intermediate management holding company for all HDI V.a.G. companies (collectively the Talanx Group). The outlook for these ratings is positive. (Please see below for a detailed listing of the companies and ratings.)

The ratings reflect Talanx AG's excellent risk-adjusted capitalisation, which is supported by significant unrealised investment gains as well as solid earnings in 2012. Talanx AG has forecast its earnings to increase marginally in 2013 through careful cost management and disciplined underwriting. However, the low interest rate environment is expected to continue to exercise negative pressure on the life business. The ratings also take into account the Talanx Group's excellent business profile as a leading German insurer.

The positive outlook of the ICR reflects the Talanx Group's improved financial flexibility following the completion of the recent initial public offering (IPO) by Talanx AG and the successful conversion of the EUR 300 million convertible bond into equity. The proceeds of the IPO are to be used to fund both organic and inorganic growth. A.M. Best will continue to monitor the success of these strategies over the next 12-24 months as well as their effect on the Talanx Group's risk-adjusted capitalisation, which continued to be excellent at year-end 2012.

Upward rating actions could occur if the Talanx Group were to successfully integrate the recent Towarzystwo Ubezpieczen EUROPA S.A. (TU Europa Group) and Towarzystwo Ubezpieczen i Reasekuracji Warta S.A. (Warta Group) acquisitions while maintaining its strong risk-adjusted capitalisation and good technical performance. An improved business profile within its target emerging market may also put upward pressure on the ratings.

Negative rating actions could occur if there were a significant deterioration in Talanx AG's risk-adjusted capitalisation, possibly driven by losses in the life business or through its exposure to eurozone debt. Poor execution and integration of the Talanx Group's mergers and acquisitions strategy may also put negative pressure on the ratings.

The FSR of A (Excellent) and ICRs of "a" have been affirmed for HDI Haftpflichtverband der Deutschen Industrie V.a.G. and its following subsidiaries:

• HDI-Gerling Industrie Versicherung AG
• HDI-Gerling Welt Service AG
• HDI-Gerling America Insurance Company
• HDI Lebensversicherung AG

The following debt rating has been affirmed:

Talanx AG—

-- "bbb" on EUR 350 million junior subordinated fixed to floating rate notes, due 2025

The methodology used in determining these ratings is Best's Credit Rating Methodology which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe Rating Services Limited Supplementary Disclosure

A.M. Best Europe Rating Services Limited is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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