Best Comments on Munich Re’s Revised Earnings

January 26, 2005

A.M. Best Co. has commented that the financial strength rating of A+ (Superior) (with a stable outlook) and the issuer credit rating of “aa” (with a negative outlook) of Muenchener Rueckversicherungs (Munich Re) (Germany) remains unaffected following the company’s revised earnings forecast for 2004 (to between EUR 1.7 and EUR 1.9 billion, rather than between EUR 1.8 billion and EUR 2 billion).

Munich Re’s consolidated earnings remain within a range supporting the current rating levels after factoring the announced expected decline in year-end results from the EUR 2.5 billion (USD 3.2 billion) pre-tax special write-down of Hypo-Vereinsbank, in which Munich holds an 18.34% stake.

Munich Re could reach its goal of 12% after-tax return on equity at year-end 2005, benefiting from a relatively stable pricing environment in non-life reinsurance. However, A.M. Best anticipates this will only be feasible if claims patterns for U.S. liability lines do not change and no further charges from Hypo-Vereinsbank are incurred. In any case, restoring the effect on capital of the recent hurricanes and Hypo-Vereinsbank will be challenging.

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