S&P Reports Munich Re’s ‘A+’ Ratings, Outlook ‘Unaffected’ by Q1 Results

Standard & Poor’s Ratings Services announced that its ratings and outlook on Germany’s Munich Reinsurance, (currently “A+”/Stable) and its related entities–collectively known as the Munich Re Group, are unaffected by the group’s first-quarter 2005 results (See IJ Web site May 11).

“Munich Re announced a first-quarter combined ratio for non-life reinsurance of 96.5 percent (after 96.3 percent for first-quarter 2004) and 99.1 percent for property/casualty primary insurance including legal expenses insurance (95.4 percent for first-quarter 2004),” said S&P. It added that these results are “in line with Standard & Poor’s expectations that Munich Re will produce combined ratios for both segments below 100 percent for 2005.

“Overall, the group produced a profit of 688 million euros [$878 million], with the operating result at 1.132 billion euros [$1.445 billion] for the first-quarter. The reinsurance segment improved substantially compared with the first quarter of 2004, with an operating result of 942 million euros [$1.2 billion], up 19.2 percent despite a quarter-on-quarter reduction in net earned premiums of 6.6 percent.”

“The significant improvement in the reinsurance result demonstrates the actively managed organic reduction in premiums coupled with continuing attractive pricing available,” noted S&P credit analyst Wolfgang Rief.

Commenting on Munich Re’s primary insurance activity, S&P noted that the operating result was up 57.1 percent to 198 million euros ($252.6 million), with gross premiums written materially unchanged from 2004 first-quarter levels at 4.882 billion ($6.23 billion). “The primary insurance result, although still in line with Standard & Poor’s expectations, was negatively affected by increased losses due to European storms and to worse-than-average winter weather,” Rief added.

S&P warned, however: “Uncertainty remains as to the continuing drain on the group from American Re–comprising American Alternative Insurance Corp. (A/Watch Neg/–), American Re-Insurance Co. (A/Watch Neg/–), and Princeton Excess & Surplus Lines Insurance Co. (A/Watch Neg/–)–despite a profitable first quarter, with U.S. GAAP net income rising to $88.5 million from $80.9 million for the same period last year.”