S&P’s changes Munich Re outlook to ‘positive’

Standard & Poor’s Ratings Services has revised its outlook on Germany-based Munich Reinsurance Co. and its core operating entities to positive from stable.
In addition, the ‘A+’ counterparty credit and insurer financial strength ratings on Munich Re and related core entities were affirmed.
“The outlook revision reflects the significant progress the group has made in strengthening its underwriting, pricing, and risk-management processes,” said Standard & Poor’s credit analyst Simon Marshall. “We consider that these improvements in management, along with the introduction of a performance culture, are permanent in nature and are a leading indicator of improved financial strength.”
Key management actions enhancing the company’s financial strength include the:
focus on integrated risk management;
full integration of American Re Corp. (main operating entities are rated A+/Positive);
“managing down of strategic asset concentrations;” and
profitability measures at ERGO.
“In 2006-07, Standard & Poor’s expects Munich Re to achieve a ROE of 12% and a combined ratio of less than 100%, both in reinsurance and primary insurance,” Marshall says. “An upgrade would be driven by the combination of the satisfactory conclusion of our review of group loss reserves, the assessment of ERM as at least strong, and continuing positive trends in earnings.”