A.M. Best Affirms Munich Re Group’s Ratings
Assigns Initial Debt Ratings to American Re

OLDWICK, N.J., December 20, 2000—A.M. Best Co. has affirmed the A++ (Superior) financial strength rating of Münchner Rückversicherungs-Gesellschaft (Munich Reinsurance Co.) and its core reinsurance subsidiaries, including American Re-Insurance Company and its affiliates. The A+ (Superior) financial strength rating of Munich American Reassurance Company (MARC) is under review with positive implications pending the closing of the purchase of CNA’s life reinsurance operations. Further, A.M. Best has affirmed the “aaa” senior debt rating of Munich Re and has assigned an initial “aa” senior debt rating to American Re Corporation and an “aa-” rating to the trust preferred securities issued by American Re Capital I.

A.M. Best’s highest rating designation for the group reflects Munich Re’s preeminent market profile, outstanding geographic and business diversification, superior capitalization and minimal financial leverage. The group’s franchise and scope of operations allow Munich Re to sustain its international leadership position with reinsurance relationships in over 150 countries. The group has an evenly distributed book of reinsurance and primary business. The primary insurance business, which is heavily weighted towards the more profitable life/health sectors, particularly ERGO, provides the group with earnings stability which mitigates the volatile results of the reinsurance operations.

The company’s superior capital strength is supported by its conservative reserve levels, historical earnings strength, conservative financial leverage, as well as significant hidden value in real estate assets and equity positions in Allianz and other German and international blue chip stocks.

The group’s exceptional financial flexibility is enhanced by modest operating and financial leverage—debt to capital ratio on a consolidated basis is below 10%—and excellent fixed charge coverage.

American Re’s ratings reflect its excellent capitalization, dominant position and reputation in the US reinsurance marketplace and historically strong operating performance despite recent sub-par earnings. Further, the ratings reflect American Re’s strategic importance to the Munich Re Group, serving as the group’s non-life North American platform. A.M. Best believes American Re adds considerable portfolio advantage to Munich Re in terms of product and geographic diversification. In return, Munich Re holds considerable financial capacity for American Re.

Overall capitalization at American Re is well managed and is supported by a conservative reserve position, careful management of its diverse risks and a high quality investment portfolio. The company has sufficient resources to adequately cover its debt servicing requirements, despite its recent weak operating performance. Continued emergence of unfavorable reserve development trends in the industry, has affected recent profitability.

For the complete report, listing of companies and debt issues go to: MunichRe

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