A.M. Best Affirms Credit Ratings of Munich Reinsurance Company and Most of Its Subsidiaries

A.M. Best has affirmed the Financial Strength Rating of A+
(Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of
“aa” of Munich Reinsurance Company (Munich Re) (Germany) and its
subsidiaries. Concurrently, A.M. Best has affirmed the Long-Term ICR of
“a” of Munich Re America Corporation (Munich Re America)
(Princeton, NJ), along with the Long-Term Issue Credit Ratings
(Long-Term IR) of Munich Re and Munich Re America. The outlook of these
Credit Ratings (ratings) is stable. (See below for a detailed listing of
the companies and ratings).

The ratings reflect Munich Re’s balance sheet strength, which A.M. Best
categorises as strongest, its very favorable business profile, strong
operating performance 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, exceeds
the level required to support the 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 sophisticated ERM framework and an
embedded risk culture.

The group’s operating performance is strong, demonstrated by a five-year
average return on equity of 8.5% (2013-2017). In 2017, Munich Re
reported a profit of EUR 392 million (2016: EUR 2.6 billion), despite
significant losses from natural catastrophes in the Americas. Profits
from life reinsurance and primary business partly offset losses in
property/casualty (P/C) reinsurance, demonstrating the benefits of the
group’s good earnings diversification.

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

The FSR of A+ (Superior) and the Long-Term ICRs of “aa” have been
affirmed with a stable outlook for Munich Reinsurance Company and
its following subsidiaries:

The following Long-Term IRs have been affirmed with a stable outlook:

Munich Reinsurance Company—

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

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

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

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

Munich Re America Corporation—

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

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 © 2018 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

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