AM Best has affirmed the financial strength rating of A+ (Superior) and the long-term issuer credit ratings of “aa” (Superior) of Hannover Rück SE (Germany) and its main subsidiaries, including Hannover Re (Bermuda) Ltd and Hannover Life Reassurance Company of America (Bermuda) Ltd.

The outlook of these credit ratings is stable.

These ratings reflect Hannover Re’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, very favourable business profile and very strong enterprise risk management.

Hannover Re’s balance sheet strength is underpinned by risk-adjusted capitalisation that exceeds the level required to support the strongest assessment, as measured by Best’s capital adequacy ratio.

AM Best expects the group’s risk-adjusted capitalisation to remain at the strongest level, supported by effective capital management, as well as sustainable strong organic capital generation from its diversified earnings profile.

The group’s robust asset-liability and liquidity management capabilities are expected to help it withstand current external headwinds associated with financial market volatility and uncertain macroeconomic prospects.

The balance sheet strength assessment also reflects Hannover Re’s prudent reserving practices and its low-risk asset portfolio. The group’s comprehensive retrocession cover, which utilises a combination of traditional and collateralised alternative solutions, is pivotal in limiting capital volatility.

In addition, the group has relatively low financial leverage and benefits from excellent financial flexibility.

The group’s operating performance is strong, demonstrated by a five-year weighted average return-on-equity ratio of 10.9 per cent and a non-life combined ratio of 99.1 per cent (2017-2021), as calculated by AM Best.

Additionally, the group’s resilient investment income provides a substantial source of overall earnings.

At the end of the third quarter of 2022, Hannover Re reported an ROE of 11.5 per cent, which was supported by the strong underlying performance in its life and health segment.

The group’s non-life book was impacted by an increased large loss burden in the first nine months of 2022, with a reported combined ratio of 99.2 per cent (same period 2021: 97.9 per cent).

AM Best expects the company’s underwriting performance to remain strong over the cycle, supported by moderate net catastrophe exposure, stringent underwriting discipline and effective expense management.

As the third largest global reinsurer, as ranked by AM Best, Hannover Re benefits from its leading position in the global property/casualty and life reinsurance markets, which is underpinned by its established brand and excellent diversification by product mix and geography.

Hannover Re’s longstanding good relationships with stakeholders and efficient infrastructure leaves it well-positioned to benefit from improved P/C reinsurance market conditions.