S&P: Munich Re Ratings ‘Unaffected’ by Reduced Earning Forecast

Following the release of Munich Re’s six-month earnings report (See above), Standard & Poor’s Ratings Services said that its ‘AA-‘ long-term counterparty credit and insurer financial strength ratings on the Group “are unaffected by the recent reduction in its forecast earnings for 2008.” The ratings outlook remains stable.

“The lower guidance for the full year predominantly reflects the earnings impact of the significant declines seen in global equity markets so far during 2008,” S&P noted. “Despite this, the group still expects to generate a net profit after tax in excess of €2 billion [$3.03 billion] for 2008. If achieved, this would represent a strong performance in a year characterized by extreme volatility in the capital markets.”

S&P added that it “expects Munich Re’s capital position, and revised earnings forecast, will prove resilient to further volatility in the capital markets and that the group will show continued strong underwriting performance broadly in line with our previously articulated targets (for further details see the full report ‘Munich Reinsurance Co.,’ published on Jan. 18, 2008, on RatingsDirect). We expect the group to return to steady earnings growth once capital markets stabilize, supported by strong underlying business fundamentals and its Changing Gear program.”

S&P also explained that the “she stable outlook on Munich Re and its rated core subsidiaries reflects our expectation that management will successfully execute Changing Gear, generate strong earnings through the cycle, and maintain a very strong competitive position and capitalization. Downward rating pressure is unlikely at present, but could emerge if Munich Re were to perform significantly below our expectations for a sustained period.”

Source: Standard & Poor’s – www.standardandpoors.com