A.M. Best Rates New Munich Re Bonds

Michael Zboron, an analyst at A.M. Best, said Munich Re has completed the placement for one bond, which raised three billion euros (approximately $3.24 billion) in the capital market. Within the next day or two, another bond is scheduled to be placed, with intent to raise some 300 million euros (approximately $324 million).

A.M. Best is keeping its "double-a" rating "indicative" for the second bond until the rating agency can be sure exactly how much Munich Re can raise in the capital market, Mr. Zboron said.

Mr. Zboron added that these subordinated debts would not lead to Munich Re exceeding the financial leverage level that A.M. Best regards as acceptable. A.M. Best said Munich Re continues to benefit from its outstanding global presence, underwriting capacity and expertise, even though its overall underwriting performance is "unsatisfactory."

A.M. Best noted that Munich Re's underlying non-life reinsurance underwriting results improved in 2002, leading to a consolidated combined ratio of 106.5 percent. The rating agency said it expects further improvements over the next two years that could allow Munich Re to achieve a break-even combined ratio underwriting performance of 100.

Currently, A.M. Best said it has a "negative" outlook on all of Munich Re's ratings, indicating a potential downgrade if equity markets continue to underperform, leading to a declining investment income.

Another worry is a potential adverse development in asbestos and environmental related claims. Munich Re maintains a "a-double-plus" financial strength rating from A.M. Best.