A.M. Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of "aa-" of Munich Reinsurance Company (Munich Re) (Germany) and its subsidiaries. Concurrently, A.M. Best has affirmed the Long-Term ICR of "a-"of Munich Re America Corporation (Munich Re America) (Princeton, NJ), along with the Long-Term Issue Credit Ratings (Long-Term IR) of Munich Re and Munich Re America. The outlook for these Credit Ratings (ratings) is stable. (See below for a detailed listing of the companies and credit ratings).
The ratings reflect Munich Re's excellent risk-adjusted capitalisation, strong competitive market position, resilient operating performance and robust risk management framework.
Despite increasingly competitive conditions in its core markets and persistently low interest rates globally, Munich Re continues to perform well, helped recently by a low incidence of natural catastrophe losses in its property/casualty reinsurance division and the positive run-off of prior years' underwriting business. Although interest rates and soft reinsurance market conditions are not new challenges for the group, there are no signs of them abating and prospective earnings are likely to be pressured. In spite of this, Munich Re is expected to maintain a solid operating performance through the underwriting cycle, supported by the excellent diversification of its (re)insurance portfolio, its solid distribution network and its conservative management philosophy. Taking into account the company's performance during the first half of the year, A.M. Best expects Munich Re to report robust, albeit lower earnings, for 2016. In addition to soft reinsurance market conditions, relentlessly low interest rates and a higher incidence of major losses in the year to date, the group's primary operation, ERGO Versicherungsgruppe AG (ERGO), is expected to report weak results for the year. ERGO's recently announced corporate-wide turn-around plan is likely to result in significant capital investment over the short-to-medium term; however, improved and more sustainable financial results are anticipated over the longer term.
Measured by Best's Capital Adequacy Ratio (BCAR), Munich Re's level of risk-adjusted capitalisation has remained excellent and relatively stable over the medium term, despite a significant repatriation of capital to shareholders in the form of share buy-backs and dividends. This has been due largely to the group's strong internal capital generation and cautious capital management. The group maintains a significant capital buffer above minimum capital requirements measured by its own internal model, which has been approved for use by its regulators under the Solvency II framework. Furthermore, A.M. Best considers Munich Re's sophisticated enterprise risk management framework to be appropriate for the complexity of the organisation and of the risks that it accepts. Munich Re's balance sheet strength is expected to remain strong during 2016 and for the foreseeable future.
The FSR of A+ (Superior) and the Long-Term ICRs of "aa-" have been affirmed for Munich Reinsurance Company and its following subsidiaries:
- Great Lakes Reinsurance (UK) SE
- New Reinsurance Company Ltd.
- Munich Reinsurance America, Inc.
- The Princeton Excess Surplus Lines Insurance Company
- American Alternative Insurance Corporation
- Munich American Reassurance Company
- Munich Reinsurance Company of Canada
- Temple Insurance Company
- American Modern Surplus Lines Insurance Company
- American Family Home Insurance Company
- American Modern Home Insurance Company
- American Modern Insurance Company of Florida, Inc.
- American Modern Lloyds Insurance Company
- American Modern Select Insurance Company
- American Southern Home Insurance Company
- American Western Home Insurance Company
- American Modern Property and Casualty Insurance Company
The following Long-Term IRs have been affirmed:
Munich Reinsurance Company-
-- "a+" on GBP 300 million 7.625% subordinated bonds, due 2028
-- "a+" on GBP 450 million 6.625% fixed to floating rate subordinated bonds, due 2042
-- "a" on EUR 1.5 billion 5.767% fixed to floating rate undated subordinated bonds
-- "a" on EUR 1.0 billion 6.0% subordinated fixed to floating rate bonds, due 2041
-- "a" on EUR 900 million 6.25% subordinated fixed to floating rate bonds, due 2042
Munich Re America Corporation-
-- "a-" on USD 500 million 7.45% senior unsecured notes, due 2026
This press release relates to Credit Ratings that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings
A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright 2016 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.
Tim Prince, +44 20 7397 0320
Susan Molineux, +1 908 439 2200, ext. 5829
Senior Financial Analyst
Christopher Sharkey, +1 908 439 2200, ext. 5159
Manager, Public Relations
Jim Peavy, +1 908 439 2200, ext. 5644
Director, Public Relations