|[November 30, 2012]
A.M. Best Affirms Ratings of Munich Reinsurance Company and Its Subsidiaries
OLDWICK, N.J. --(Business Wire)--
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 all debt ratings of Munich Re. The
outlook for these ratings is stable.
Additionally, A.M. Best has upgraded the ICR and senior debt rating to
"a-" from "bbb+" of Munich Re America Corporation (Princeton,
NJ). The outlook for the ratings has been revised to stable from
positive. (See below for a detailed listing of the companies and
Munich Re remains a leading global carrier in the reinsurance market
with complementary primary and health insurance operations. The company
has the ability to write and service reinsurance clients on a worldwide
basis through an extensive distribution system. Over the past several
years, Munich Re made several successful business acquisitions enabling
it to complement its numerous products and expand into new markets.
Munich Re's risk-adjusted capitalization remains at levels appropriate
for its FSR. Capital levels increased in 2011 despite several large
catastrophic losses. Capital levels have been further strengthened
through September 30, 2012 as operating results benefitted from a benign
level of catastrophes during the year. Furthermore, A.M. Best expects
Munich Re's risk-based capitalization to be maintained at year-end 2012
despite the effects of Hurricane Sandy.
The company's operating results through the first nine months of 2012
reflected the low level of catastrophes with a combined ratio of 93.6%.
The primary insurance segment performed better than breakeven with a
combined ratio of 96.9% during the first nine months of 2012. Likewise,
the health segment performed slightly better than breakeven at 99.2% for
the same period.
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. The company also makes extensive use of its
proprietary capital model to analyze various stress scenarios.
Munich Re maintains an appreciable level of sovereign risk from holdings
in Italy, Spain and Ireland, albeit at lower levels than last year.
Somewhat mitigating A.M. Best's concern with this risk is that a large
portion of any losses emanating from investments in these countries
relates to products, which allows Munich Re to pass the loss directly to
the client reducing its net exposure to manageable levels. Munich Re
also maintains some risk attributable to European banks. At present,
these exposure levels also seem manageable.
Positive rating actions could occur if over the next several years,
Munich Re's operating performance and risk-adjusted capitalization
significantly and consistently exceed its peer group of global
Negative rating actions could occur if Munich Re's operating performance
and risk-adjusted capitalization consistently fall below A.M. Best's
expectations for its current rating level by a significant margin for a
The FSR of A+ (Superior) and ICRs of "aa-" have been affirmed for Munich
Reinsurance Company and its following core subsidiaries:
Munich Reinsurance America, Inc.
American Alternative Insurance Corporation
The Princeton Excess & Surplus Lines Insurance Company
Great Lakes Reinsurance (UK) PLC
New Reinsurance Company
Munich Reinsurance Company of Canada
Temple Insurance Company
Munich American Reassurance Company
American Modern Home Insurance Company
American Family Home Insurance Company
American Western Home Insurance Company
American Modern Surplus Lines Insurance Company
American Modern Select Insurance Company
American Southern Home Insurance Company
American Modern Insurance Company of Florida, Inc.
First Marine Insurance Company
American Modern Lloyds Insurance Company
The following debt ratings have been affirmed:
Munich Reinsurance Company-
-- "a+" on GBP 300 million
7.625% subordinated bonds, due 2028
-- "a+" on EUR 1.5 billion
fixed/floating rate undated subordinated bonds
-- "a+" on EUR 3.0
billion 6.75% subordinated Eurobonds, due 2023
-- "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,
-- "a+" on GBP 450 million 6.625% fixed rate subordinated
bonds, due 2042
The following debt rating has been upgraded:
Munich Re America Corporation-
-- to "a-" from "bbb+" on USD
500 million 7.45% senior unsecured notes, due 2026
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a
comprehensive explanation of A.M. Best's rating process and contains the
different rating criteria employed in the rating process. Key criteria
utilized include: "Risk Management and the Rating Process for Insurance
Companies"; "Understanding BCAR for Property/Casualty Insurers";
"Natural Catastrophe Stress Test Methodology"; "Understanding Universal
BCAR"; "Rating Members of Insurance Groups"; " Understanding BCAR for
Canadian Property/Casualty Insurers"; and "Equity Credit for Hybrid
Securities." Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS
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