AM Best also has affirmed the Long-Term ICR of "a" of Munich Re America Corporation (Munich Re America) (Princeton, NJ) and the Long-Term Issue Credit Ratings (Long-Term IR) of Munich Re and Munich Re America. The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Munich Re's balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, very favorable business profile and very strong enterprise risk management.
Munich Re's balance sheet strength is underpinned by risk-adjusted capitalization that exceeds the level required to support the strongest assessment, as measured by Best's Capital Adequacy Ratio. AM Best expects risk-adjusted capitalization to remain at the strongest level, despite the group's exposure to potentially large losses and its record of substantial dividend payments and share buy-backs. In addition, the group's financial leverage is relatively low, and it benefits from excellent financial flexibility.
The group's operating performance is strong, demonstrated by a 10-year weighted average return on equity of 8.6% (2010-2019). In 2019, Munich Re reported a net profit of EUR 2.7 billion (2018: EUR 2.2 billion). The group's property/casualty (P/C) reinsurance division reported a net profit of EUR 1.56 billion despite exposure to significant natural catastrophe and man-made losses. Life & health (L&H) reinsurance and ERGO reported good net profits of EUR 706 million and EUR 440 million, respectively, demonstrating the benefits of the group's good earnings diversification.
Munich Re is a leading global reinsurer and its business profile benefits from excellent diversification, with the performance of its various life, health and P/C operations largely uncorrelated. Given its global market presence and excellent brand, the group is well-positioned to benefit from improving P/C reinsurance market conditions and positive pricing momentum.