A.M. Best Removes From Under Review and Upgrades Issuer Credit Ratings of Munich Reinsurance Company and Most of its Subsidiaries

LONDON--(BUSINESS WIRE)-- A.M. Best has removed from under review with positive implications and upgraded the Long-Term Issuer Credit Ratings (Long-Term ICR) to “aa” from “aa-” and affirmed the Financial Strength Ratings (FSR) of A+ (Superior) of Munich Reinsurance Company (Munich Re) (Germany) and most of its A.M. Best-rated subsidiaries. Concurrently, A.M. Best has upgraded the Long-Term ICR to “a” from “a-” of Munich Re America Corporation (Munich Re America) (Princeton, NJ). At the same time, A.M. Best has upgraded a number of the related Long-Term Issue Credit Ratings (Long-Term IR) of Munich Re and Munich Re America, and assigned Long-Term IRs of “a” to surplus notes issued by certain U.S. operating companies. A stable outlook has been assigned to all of these Credit Ratings (ratings). (See below for a detailed listing of the companies).

The ratings were placed under review with positive implications on Oct. 13, 2017, following the release of the updated Best’s Credit Rating Methodology (BCRM). The ratings have been removed from under review as A.M. Best has completed its analysis of the Munich Re companies under the updated BCRM.

The upgrades reflect A.M. Best’s opinion that the rating fundamentals of Munich Re, as analysed under the updated BCRM, are supportive of the revised Long-Term ICR. The ratings reflect Munich Re’s balance sheet strength, which A.M. Best categorises as strongest, as well as its strong operating performance, very favourable business profile and very strong enterprise risk management (ERM).

Munich Re’s balance sheet strength is underpinned by risk-adjusted capitalisation which, measured by Best’s Capital Adequacy Ratio, is comfortably in excess of the level required to support A.M. Best’s strongest assessment. A.M. Best expects risk-adjusted capitalisation to be maintained at the strongest level, despite the group’s exposure to potentially large losses and its record of substantial dividend payments and share buy-backs. Underwriting and market risks drive Munich Re’s economic capital requirements. In A.M. Best’s opinion, these risks are managed appropriately, supported by a healthy capital buffer, a sophisticated ERM framework and an embedded risk culture.

The strong operating performance assessment considers Munich Re’s robust shareholder returns, active cycle management and diversified earnings profile. A.M. Best expects the group to report a small profit in 2017, assuming average loss experience in the remainder of the year. However, the result will be significantly below its initial target and its cost of capital, principally due to the natural catastrophe losses in the Americas that have affected the entire reinsurance industry. Although ultimate losses from the events in the second half of 2017 remain uncertain, A.M. Best expects them to be broadly in line with the group’s risk appetite.

Munich Re is a leading global reinsurer. Its business profile benefits from excellent diversification, with the performance of its various life, health, property and casualty operations largely uncorrelated. The group’s strong global franchise, superior access to clients and considerable expertise provide some insulation against intensely competitive reinsurance market conditions.

The Long Term ICRs have been upgraded to “aa” from “aa-” and the FSRs of A+ (Superior) have been affirmed for Munich Reinsurance Company and its following subsidiaries:

• Great Lakes Insurance 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 upgraded:

Munich Reinsurance Company—

— to “aa-” from “a+” on GBP 300 million 7.625% subordinated bonds, due 2028

— to “a+” from “a” on EUR 1.0 billion 6.0% subordinated fixed to floating rate bonds, due 2041

— to “a+” from “a” on EUR 900 million 6.25% subordinated fixed to floating rate bonds, due 2042

Munich Re America Corporation—

— to “a” from “a-” on USD 500 million 7.45% senior unsecured notes, due 2026

The following Long-Term IRs have been affirmed:

Munich Reinsurance Company—

— “a+” on GBP 450 million 6.625% fixed to floating rate subordinated bonds, due 2042

The following Long-Term IRs have been assigned:

American Alternative Insurance Corporation—

— “a+” on USD 92.5 million 5.0% surplus notes

The Princeton Excess & Surplus Lines Insurance Company—

— “a+” on USD 20.1 million 5.0% surplus notes

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. For information on the proper media

use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.

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A.M. Best

Tim Prince, +44 20 7397 0320

Director, Analytics

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Susan Molineux, +1 908-439-2200 5829

Senior Financial Analyst

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Christopher Sharkey, +1 908-439-2200, ext. 5159

Manager, Public Relations

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Jim Peavy, +1 908-439-2200, ext. 5644

Director, Public Relations

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Source: A.M. Best