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A.M. Best confirms top rating for Hannover Re

Hannover, 16 December 1997:

The US rating agency A.M. Best has confirmed the financial strength and solvency of both Hannover Re and its subsidiary E+S Rück - which exclusively serves the German market - through the award of its second-highest rating "A+ (Superior)".

A.M. Best states that the rating reflects Hannover Re's bottom line oriented underwriting practice, its excellent liquidity and the well-balanced geographical spread of its portfolio. Explaining the reasons for its decision, A.M. Best also emphasizes the group's conservative reserves, its professional management, its efficient operating structure and the successful implementation of strategic acquisitions to enhance a balanced portfolio. These factors have contributed to building a strong balance sheet. In addition, A.M. Best remarks that Hannover Re has played a pioneering role in the securitization of insurance and reinsurance risks, thereby enjoying a corresponding degree of capital flexibility.

A.M. Best was established in Oldwick, New Jersey in 1899 by Alfred M. Best as a rating agency specializing in insurance companies. Although other agencies can also trace their beginnings back into the 19th century, it was not until the 1970s and 1980s that the rating of insurance companies became standard practice.

Ratings are assessed on the basis of both quantitative and qualitative factors. The quantitative aspects include, amongst other things, profitability, liquidity, equity and reserves, technical provisions and investments. On the qualitative side, particular importance attaches to the establishment of appropriate loss reserves, the quality and diversification of investments, the portfolio mix and management competence.

Insurers fear receiving a downgraded rating, since this can certainly have a negative impact on business. Especially in the UK and US insurance markets, ratings play a major role in market acceptance.

Hannover Re commissioned evaluations from A.M. Best as long ago as 1985. In those days, the company was not actually awarded a rating. Rather, reports were compiled which enabled - above all US-based - insurers to correctly analyse the company's balance sheet. In 1991, Hannover Re was the first German and indeed one of the first Continental European companies to receive the highly prized "A+ (Superior)" rating.

The printed rating reports compiled by A.M. Best will be available in January 1998. We would be pleased to send you copies on request.