Fitch Upgrades ERGO Subsidiaries; Outlook Stable

Tue Mar 25, 2014 10:57am EDT

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(The following statement was released by the rating agency) FRANKFURT/LONDON, March 25 (Fitch) Fitch Ratings has upgraded Europaeische Reiseversicherung AG's (ERV) and VORSORGE Lebensversicherung AG's (Vorsorge) - subsidiaries of ERGO Versicherungsgruppe AG's (ERGO; A+/Stable) - IFS ratings to 'AA-' from 'A+'. The Outlooks on the ratings are Stable. ERV and Vorsorge are operating insurance companies and 100% subsidiaries of the intermediate holding company ERGO, which is fully owned by Munich Re's (AA-/Stable). KEY RATING DRIVERS The upgrade reflects Fitch's new view on ERV and Vorsorge within ERGO as 'core' strategic subsidiaries of the group. ERGO's status within Munich Re's operations is also regarded as 'core'. As a result, ERV's and Vorsorge's IFS ratings have been aligned with ERGO primary insurance operations' 'AA-' IFS rating. The main rationale for viewing these companies as 'core' is the profit-and-loss and control agreements in place between ERGO and its subsidiaries. Fitch considers that these agreements demonstrate ERGO's willingness to support the companies and is a reflection of the importance which ERGO attributes to their operations. The profit-and-loss and control agreements mean that ERGO would be obliged to replenish the capital of the subsidiaries if they report a loss. The agreements are approved by the regulator and are renewed annually at least six months in advance. Furthermore, the revision of the status is supported by the increased integration of ERV and Vorsorge within ERGO in recent years. The integration includes brand alignment and a restructuring of ERV, cementing its position in ERGO. RATING SENSITIVITIES Any material weakening in the strategic importance of the companies within the ERGO/Munich Re group could lead to a downgrade. In addition, any upgrade or downgrade of ERGO's/Munich Re's ratings would be reflected in the subsidiaries' ratings. ERGO is Munich Re's primary insurance group. At end-2012 ERGO had total assets of EUR147bn and reported net income of EUR289m. Fitch expects ERGO's net income to have increased in 2013 despite larger claims arising from German floods. It also expects that ERGO will maintain its strong underwriting profitability in its German non-life business and will further improve its international underwriting profitability in 2014. Contacts: Primary Analyst Dr. Christoph Schmitt Director +49 69 768076 121 Fitch Deutschland GmbH Taunusanlage 17, 60325 Frankfurt Secondary Analyst Dr. Stephan Kalb Senior Director +49 69 768076 118 Committee Chairperson Chris Waterman Managing Director +44 20 3530 1168 Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153, Email: hannah.huntly@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria, 'Insurance Rating Methodology', dated 13 November 2013, are available at www.fitchratings.com. Applicable Criteria and Related Research: Insurance Rating Methodology here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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