A.M. Best expects Inter Hannover’s risk-adjusted capitalisation to remain strong at year-end 2007 and 2008, supported by Hannover Re’s capital injection of GBP 15 million (USD 30 million) in mid-2007. The rating factors Inter Hannover’s importance to Hannover Re as its only vehicle for writing agency business (written through binders). Additionally, Inter Hannover fronts business for its parent in Europe, as Hannover Re is not licensed to write direct business.
A.M. Best believes that Inter Hannover’s overall performance is likely to improve for the 2007 year-end, increasing from the modest pre-tax profit of GBP 1 million (USD 2 million) reported in 2006. However, the positive return is expected to be dependent upon investment income. A.M. Best anticipates deterioration in the combined ratio in 2007 from 108% in 2006 as results will be affected by the termination/cancellation of several contracts leading to a reduction in net written premiums of approximately 50%. This will increase the expense ratio, despite a significant expected fall in the absolute level of expenses from the prior year. The absence of this issue in 2008 is expected to lead to improvement in the company’s combined ratio.
A.M. Best believes Inter Hannover has a good business profile based on its core accounts of agency binders and fronting business. The business written comprises a mix of large London market and Scandinavian risks, balanced by smaller commercial and personal lines business. In 2008, A.M. Best believes that Inter Hannover is likely to expand its operations in Australia and the United States to supplement its core geographic focus in major European countries.
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