TEXT-Fitch affirms ERGO's ratings; outlook stable

Mon Feb 18, 2013 7:56am EST

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(The following statement was released by the rating agency)

Feb 18 - Fitch Ratings has affirmed Germany-based insurers ERGO Lebensversicherung AG's (ERGO Life) and DKV Deutsche Krankenversicherung AG's (DKV) Insurer Financial Strength (IFS) ratings at 'AA-'. The agency has simultaneously affirmed VORSORGE Lebensversicherung AG's (Vorsorge) and Europaeische Reiseversicherung AG's (ERV) IFS ratings at 'A+'. The Outlooks on all the ratings are Stable.

ERGO Life, DKV, Vorsorge and ERV are operating insurance companies and 100% subsidiaries of the holding company, ERGO Versicherungsgruppe AG (ERGO). Fitch has also affirmed ERGO's Long-term Issuer Default Rating (IDR) at 'A+' with a Stable Outlook.

KEY RATING DRIVERS

The rating actions follow the agency's affirmation of Munich Re's IFS rating at 'AA-' (see "Fitch Affirms Munich Re's IFS Rating at 'AA-'; Outlook Stable", dated 18 February 2013 on www.fitchratings.com). Munich Re is ERGO's 100% shareholder.

ERGO's ratings reflect its core status within Munich Re's operations. ERGO Life and DKV are viewed by Fitch as core to ERGO in terms of their size and strategic importance. Vorsorge and ERV are viewed by Fitch as very important to ERGO as defined within Fitch's group rating methodology. Vorsorge's and ERV's ratings benefit from a two-notch uplift from their stand-alone credit profile.

ERGO is Munich Re's primary insurance group. Fitch expects that ERGO has earned a net income of nearly EUR300m (2011: EUR349m) in 2012, with bottom-line profitability pressured by the restructuring of ERGO's distribution department. According to preliminary figures, Munich Re's primary insurance operations' net combined ratio improved to 98.7% (2011: 99.1%). While German non-life operations' underwriting profitability was suppressed in 2012 by several major claims, international non-life underwriting profitability improved.

RATING SENSITIVITIES

Key rating triggers for all the ratings are the strategic importance of the companies within the Munich Re group and the fact that any change of Munich Re's rating would result in a change of ERGO's and its subsidiaries' ratings.

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