Standard & Poor's Ratings Services has affirmed its 'A+' counterparty credit and insurer financial strength ratings on Germany-based Munich Re and related core reinsurance entities. The outlook is stable.
The affirmation follows Munich Re's announcement of a $1.6bn pretax net loss reserve charge at American Re-Insurance Co. (A/Watch Dev/--), mainly relating to liability and workers' compensations business incurred between 1997 and mid-2002, as well as to asbestos and environmental claims. The impact at the consolidated Munich Re level will be substantially less at €0.4m (pretax) due to the partial release of incurred-but-not-reported (IBNR) reserves held at holding company level.
Standard & Poor's credit analyst Karin Clemens, said: "The affirmation reflects the significant progress Munich Re has made in strengthening its underwriting and pricing processes. As a result, Standard & Poor's regards Munich Re to be better positioned to maintain strong operating performance throughout the cycle.
"Very strong capitalization and a very strong competitive position further support the rating. The announced reserve addition, however, is a setback in terms of our earnings expectations and, in our view, the risk of further reserve increases remains. Together with the group's relatively short-term track record of strong profitability these are offsetting factors."
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