A.M. Best Downgrades Issuer Credit Rating of Munich Re; Affirms Financial Strength Rating and Removes From Under Review.OLDWICK, N.J. -- A.M. Best Co. has downgraded to "aa-" from "aa" the issuer credit rating (ICR (Intelligent Character Recognition or Image Character Recognition) The machine recognition of hand-printed characters as well as machine printing that is difficult to recognize. ) of Muenchener Rueckversicherungs (Munich Re Munich Re AG, in German Münchener Rück AG (ISIN: DE0008430026), is the world's second largest reinsurance company with over 5,000 customers in 160 countries and has its headquarters in Munich, Germany. ) (Germany). At the same time, A.M. Best has affirmed the financial strength rating (FSR (Free System Resource) In Windows 3.x, the amount of unused memory in various 64K blocks reserved for managing current applications. Every open window takes some space in this area. See Windows memory limitation. ) of A+ (Superior) of Munich Re and downgraded the debt ratings to "a" from "a+" of the subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". issued by Munich Re Finance B.V. and guaranteed by Munich Re. All ratings have been removed from under review and assigned a negative outlook. (See below for detailed list of ratings.) The ratings reflect Munich Re's reduced risk-adjusted capitalisation as a result of the significant reserve strengthening at American Re, as well from the impact of the recent hurricanes in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . The rating also factors more volatile prospective earnings due to Munich Re's high exposure to natural catastrophes. A further factor is Munich Re's excellent business position in the worldwide reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. market. The negative outlook reflects the potential pressure on Munich Re's consolidated capitalisation from uncertainties regarding future claims patterns for U.S. liability and the increased frequency of natural catastrophes for which Munich Re provides significant reinsurance capacity. Reduced risk-based capital--Munich Re's risk-adjusted capitalisation of its reinsurance operations is likely to be reduced from the impact of a number of hurricanes and floods as well as the reserve strengthening of USD USD In currencies, this is the abbreviation for the U.S. Dollar. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 1.6 billion in combination with other measures at American Re. However, this is partially compensated by improved capitalisation, mainly due to higher revaluation Revaluation A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. reserves. A.M. Best recognises Munich Re's strong financial flexibility and low financial leverage. Reduced but excellent earnings--Overall earnings are likely to remain excellent and within Munich Re's earnings target of 12% return on equity, as higher non-recurring capital gains are partially offsetting the impact of the U.S. hurricanes and other natural catastrophes as well as the reserve strengthening at American Re. Prospectively, A.M. Best believes earnings are likely to be more volatile due to Munich Re's significant exposure to worldwide natural catastrophes. In A.M. Best's opinion, Munich Re's ratings could become under pressure if the company is unable to achieve its own earnings targets in 2006. Excellent business position--A.M. Best recognises Munich Re's excellent business position in the worldwide reinsurance market, where it remains one of the market leaders despite further premium reduction as a result of strict adherence to underwriting standards and the cancellation of a larger quota share contract. In primary insurance, Ergo Latin, therefore; hence; because. ergo (air-go) conj. Latin for therefore, often used in legal writings. Its most famous use was in "Cogito, ergo sum:" "I think, therefore I am" principle by French philosopher Rene Descartes (1596-1650). Versicherungsgruppe benefits from higher demand for supplementary health insurance in Germany and stronger growth of life products abroad. The FSR of A+ (Superior) has been affirmed and removed from under review and the ICR has been downgraded to "aa-" from "aa" for Munich Re and its following core subsidiaries: --Munich Reinsurance Company of Australasia Limited --New Reinsurance Company --Munich Reinsurance Italy S.p.A. --Munich Reinsurance Company of Canada --Munich American Reassurance Company --Great Lakes Reinsurance (UK) PLC The debt rating of "a+" has been downgraded to "a" for the following issues: Munich Re Finance B.V. --GBP 300 million 7.625% subordinated bonds Subordinated bonds Securities that fall after others in priority of claims on the entity in the case of financial distress. , due 2028 --EUR 3 billion 6.75% subordinated eurobonds, due 2023 For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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