A.M. Best Affirms Munich Re’s Financial Strength and Debt Ratings in the Wake of the Restructuring Announcement

OLDWICK, N.J., April 2, 2001—A.M. Best Company has affirmed the A++ (Superior) financial strength and “aaa” senior debt ratings of Muenchener Rueckversicherungs-Gesellschaft (Munich Re) and the affirmation is extended to all of its core reinsurance subsidiaries. Munich Re has announced its intention to increase its share holding in Ergo Versicherungsgruppe, Munich Re’s primary insurance holding company, from 62.9% to 95% by offering attractive terms to minority shareholders. Additionally it will acquire Allianz’s holdings in HypoVereinsbank (HVB), Germany’s second largest private bank, bringing Munich Re’s share holding to slightly over 25% in exchange for selling its position in Dresdner Bank and Allianz Leben to Allianz A.G. Munich Re and Allianz A.G. will reduce their strategic share holdings in each other to slightly over 20% by 2003. A.M. Best views this as a tax-advantaged realignment that will strengthen Munich Re’s capital base, extend ERGO’s distribution capability and fortify its geographic presence in Europe through its renewed exclusive strategic cooperation agreement with HVB. The transaction is expected to improve Munich Re’s financial leverage.

ERGO’s shareholders will be offered a two-for-one swap of ERGO shares for Munich Re shares allowing Munich Re to increase its ownership position from 62.9% to 95%. HVB will maintain its 13% stake in Munich Re but will increase its share holdings in ERGO to 5%. Additionally, Munich Re will further realign its holdings by completing its previously announced sale of its minority interests in Bayerische Versicherungsbank A.G. and Frankfurter Versicherungs A.G.

This restructuring has been facilitated by the recently approved German fiscal measure allowing equity sales without capital gains taxes as of 2002. A.M. Best anticipated that this measure would spur many companies having participations in other companies to strategically redeploy their embedded assets.

A.M. Best views the restructuring positively as it allows Munich Re’s management to focus all of its strategies in a more effective business structure to extend its product and service offerings to its client base in what is becoming an increasingly more competitive German and global financial services market place. It is expected that additional strategic restructuring and acquisitions will follow, not only in Germany but also throughout Europe as various financial institutions reposition themselves for a more competitive environment.

The A++ (Superior) financial strength rating for the following reinsurance subsidiaries has been affirmed:

Muenchener Rueckversicherungs-Gesellschaft (Munich Reinsurance Company), Munich
Muenchener Rueck Italia S.p.A., Milan, Italy
New Reinsurance Company, Geneva
Great Lakes Reinsurance (UK) PLC, London
Munich Reinsurance Company of Canada, Toronto
Munich Reinsurance Company of Australasia, Sydney, Australia
Munich Reinsurance Company of Africa, Ltd., Johannesburg, South Africa
American Re-Insurance Co., Princeton, New Jersey
American Alternative Ins. Co., New York
Princeton Excess & Surplus Lines Insurance Co., Wilmington, Delaware
Munich American Reassurance Company, Atlanta, Georgia

The following existing debt ratings were affirmed:

Muenchener Rueckversicherungs-Gesellschaft: “aaa” rating on the unsubordinated debt; Euro bonds 1% fixed rate, due 2005.
American Re Corporation: “aa” rating on $500 million 7.45% Senior Notes, due 2026.
American Re Capital: “aa-” rating on $237.5 million 8.5% Cumulative Quarterly Income Preferred Securities (“QUIPS”), due 2025.

A.M. Best Co., established in 1899, is the world’s oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best’s Web site at www.ambest.com.

A.M. Best Co.