S&P Global Ratings has raised to ‘AA’ from ‘AA-‘ its long-term issuer credit and insurer financial strength ratings on the entities within the Munich Re group, citing significant improvement in overall profitability and earnings diversification in recent years.

munich-re-munich“Our base case indicates that Munich Re’s strong and well-diversified earnings will remain in line with ‘AA’ rated peers such as Allianz, Zurich, and Chubb for the next two years,” S&P explained.

Munich Re’s earnings diversification reportedly benefits from sound technical performance in all its major divisions. Compared with most reinsurance peers, the Munich Re group therefore benefits from higher diversification and lower dependence on cyclical businesses such as short-tail P&C reinsurance.

As per S&P, Munich Re has additionally proved its ability to harness the recent favourable market and pricing conditions for P&C reinsurance.

“We anticipate that the group’s conservative balance sheet and strong reserving will enable it to cope well with challenges, such as social inflation and capital market volatility. That said, we consider that Munich Re’s exposure to large tail risks, such as natural catastrophes, could lead to some capital and earnings volatility. These risks are partially offset by the group’s extremely diversified portfolio, strong risk controls, and cautious reserving practices, in our view,” The rating agency said.

S&P continued, “The stable outlook indicates that, in our view, the group is likely to preserve its excellent competitive position and conservative capital management over the next two years, supported by its strong and diversified earnings profile.

“We could lower the ratings within the next 12-24 months if the group appears likely to perform below our expectations or ‘AA’ rated peers for a prolonged time, or if its risk-based capital adequacy declines and is forecast to remain below the 99.95% confidence level for a similar period.

“This could occur if Munich Re incurs materially higher investment charges or suffers significant and unexpected losses from large natural catastrophes.

“An upgrade is very unlikely over the next 24 months, given the potential for Munich Re’s earnings profile to be more volatile than those of higher-rated peers.”

Back in May, Munich Re revealed a rise in insurance revenue from contracts issued to €15.1 billion for Q1 2024, driven by organic growth in its reinsurance business and also at ERGO International.

Alongside the rise in insurance revenue in Q1 2024, the reinsurer’s total technical result climbed to €2.8 billion, while the operating result hit almost €3 billion.

Munich Re also disclosed a net profit of €2.1 billion for Q1 2024, a reinsurance combined ratio of 75.3% in P&C, and a total technical result in L&H of €586 million.

 

Fuente: Reinsurance News

Enlace: https://www.reinsurancene.ws/sp-upgrades-munich-res-ratings-on-improved-profitability-earnings-diversification/