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A.M. Best Affirms Ratings of Munich Reinsurance Company and Its Subsidiaries

Posted on 12 Oct 2010

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A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of “aa-” of Munich Reinsurance Company (Munich Re) (Germany) and its subsidiaries. Concurrently, A.M. Best has affirmed the debt ratings of “a+” on GBP 300 million 7.625% subordinated bonds, EUR 1.5 billion fixed/floating rate undated subordinated bonds and EUR 3 billion 6.75% subordinated Eurobonds issued by Munich Re. The outlook for these ratings is stable.

Additionally, A.M. Best has affirmed the ICR and senior debt ratings of “bbb+” of Munich Re America Corporation (Princeton, NJ). The outlook for these ratings is positive. (See below for a detailed listing of the companies and ratings.)

Munich Re remains a leading global carrier in the reinsurance market and through its network of local subsidiaries, a dominant primary insurer in the German market, particularly in health insurance. With the ability to write and service reinsurance clients through an extensive worldwide distribution system, over the past several years, Munich Re made several major business acquisitions enabling the company to complement its numerous products and expand into new markets. These acquisitions included The Hartford Steam Boiler Group in 2009 and The Midland Company in 2008. Munich Re’s acquisition strategy targets well run and financially sound organizations that not only provide access to new markets but enhance an already impressive level of intellectual capital.

Munich Re’s risk-adjusted capitalization remains at levels appropriate for its FSR. Capital levels increased in 2009 over the prior year primarily as a result of improved investment earnings. Capital levels continued to increase through June 30, 2010 also as a result of improved investment earnings. During 2009, Munich Re continued its share buyback program, acquiring seven million shares worth EUR 399 million under two share buyback programs. Shares purchased under the buyback programs had no material negative impact on the company’s risk-adjusted capitalization.

Munich Re’s business performed solidly in 2009, achieving a consolidated result of EUR 2.6 million and an operating result of EUR 4.7 million, respectively. Both amounts improved from prior year performances. Operating results through the first half of 2010 were affected by losses emanating from the Chilean earthquake, Winter Storm Xynthia and the Deep Water Horizon oil spill, but on a consolidated basis remained in line with the first half of 2009. The combined ratio for the reinsurance segment of 103.8% through June 30, 2010 was elevated due to the worldwide catastrophes and was outpaced by better than breakeven performances at Munich Re’s primary insurance segment at 94.5% and Munich Health segment at 99.5%.

A.M. Best considers Munich Re’s risk management program to be strong. Along with a formal risk management structure, the company dedicates a significant level of personnel to monitor risk in all operating segments throughout the world.