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16th of May 2012

Munich Re awarded ‘superior’ rating

Vicky Beckett 28/10/2011

Munich Re’s financial strength rating of A+ (superior) and issuer credit rating of aa- was affirmed.
 
AM Best reconfirmed the Munich Re and its subsidiaries’ ratings and debt ratings. The outlook for the ratings is stable.
 
Additionally, the ratings company affirmed its issuer credit rating (ICR) of “bbb+” and senior debt rating of “bbb+” for Munich Re America Corporation. The outlook for these ratings is positive.
 
In recent years, Munich Re made several successful business acquisitions complementing the company’s numerous products, allowing it to expand into new markets.
 
Munich Re’s risk-adjusted capitalisation rests at levels appropriate for its financial strength rating (FSR).
 
Capital levels increased in 2010 despite several large catastrophic losses but declined through June 30, this year, due to operating results being hit by major catastrophic events occurring during the first half of the year.
 
Through the first half of 2011, Munich Re’s operating results were affected by losses emanating from the Japan earthquake and tsunami, the New Zealand earthquake and Australian typhoon, which resulted in a combined ratio of 133.1%.
 
However, the primary and health insurance segments performed better than breakeven with combined ratios of 96.5% and 99.7%, respectively.
 
Munich Re’s risk management programme and formal risk management structure is reported to be strong.
 
The company dedicates a significant level of staff to monitor risk in operating segments worldwide.
 
The company also makes extensive use of its proprietary capital model to analyse various stress scenarios.
 
Munich Re’s risk exposure is reduced to manageable levels by maintains an appreciable level of sovereign risk from holdings in Italy, Spain, Ireland, Portugal and Greece.
 
50% of those investments are within Munich Re’s primary life and health operations where the risk is shared with policyholders.
 
Additionally, Munich Re benefits from the appreciation of the market value of its overweight position in high quality bonds, in particular German bunds.
 
Munich Re also maintains some risk attributable to European banks, these exposure levels manageable.

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