S&P Revises Nürnberger Outlook to Negative

Standard & Poor’s Ratings Services has revised its outlook to negative from stable on the counterparty credit and insurer financial strength ratings of German life insurer Nürnberger Lebensversicherung AG (NLV) and property/casualty insurer Nürnberger Allgemeine Versicherungs – AG (NAV) as well as the outlook on the group’s holding company Nürnberger Beteiligungs-AG (NBG) following a review. S&P affirmed its “A” counterparty credit and insurer financial strength ratings on NLV and NAV (collectively Nürnberger) as well as the “BBB+” counterparty credit rating on NBG.

“The outlook revision reflects concerns about the continued effectiveness of the group’s unique business model in motor insurance in an evolving competitive landscape, the more moderate recovery in bottom-line earnings relative to similarly rated peers, and adequate enterprise risk management practices,” stated S&P credit analyst Ralf Bender. “On the other hand, the affirmation of the rating reflects the expectation that Nürnberger will continue to benefit from sound technical profits, strong capitalization, comparably low asset-liability risk exposure, and an established competitive position in the growing unit-linked and disability market.”

S&P said its negative outlook is based on its “expectation that the changing competitive landscape in the group’s key non-life business line, motor, might have an adverse impact on its competitive position and operating performance, which may result in bottom-line earnings that continue to lag those of similarly rated peers.

“Group capitalization is expected to remain at least strong. Life new business margins should remain higher than 13 percent and the non-life net combined ratio lower than 100 percent, translating into an ROE of 5 percent to 7 percent in 2007.”

S&P also indicated that the “ratings might be lowered if the group’s competitive position were to deteriorate significantly or if the quantitative targets are not met. Conversely, the outlook could be revised back to stable if the group maintains its strong competitive position in life insurance, manages to further develop its group life business, and defends its above-average technical performance while sustaining its competitive position at largely stable premium levels in non-life.”