A.M. Best Company Downgrades Munich American Reinsurance and Affirms Prudential Property & Casualty

Strategic Insights -

Munich American Reinsurance Company and Munich Reinsurance Company have seen their "A++" (Superior) Best's Rating lowered to "A+" (Superior) following weak operating results, high catastrophe exposures, and market challenges in expanding their casualty writings during soft market conditions. The group's combined ratio of 116 in 1994 reflects the continued impact of catastrophe losses. However, their leadership position in the domestic property reinsurance market, management's conservative operating and reserving strategies, and strong capitalization have earned them a "Superior" classification.

Prudential Property & Casualty Insurance Company and its subsidiaries, Prudential Commercial Insurance Company, Prudential Lloyds, and Prudential General Insurance Company, have had their "A-" (Excellent) Best's Rating affirmed. This reflects their solid personal automobile results, substantial catastrophe reduction progress in Florida, expense reductions, and the support of their strong parent, Prudential Insurance Company of America, which contributed over $725 million to the insurer to offset huge losses from Hurricane Andrew in 1992.

However, the group has experienced weak operating performance over the past few years, as well as deteriorating underwriting leverage, lack of forward marketing momentum, management turnover, and high ongoing direct exposure to catastrophes. Best's rating outlook for the group is negative, given the challenges facing management in improving profitability and capitalization.

Key Takeaways:

  • Munich American Reinsurance Company and Munich Reinsurance Company have seen their Best's Rating downgraded from "A++" to "A+" due to weak operating results and high catastrophe exposures.
  • Prudential Property & Casualty Insurance Company and its subsidiaries have had their Best's Rating affirmed at "A-" due to solid personal automobile results and substantial catastrophe reduction progress.
  • The group's leadership positions in the domestic property reinsurance market and strong capitalization have earned them a "Superior" classification.
  • Prudential Reinsurance Company's Best's Rating has been affirmed at "A" due to its solid capitalization and commitment to reserve adequacy.
  • A.M. Best believes the successful execution of Prudential Re's pending IPO is critical for solidifying its market position and developing forward marketing momentum.
  • St. Paul Fire & Marine Insurance Company has been affirmed with a Best's Rating of "A+" due to management's conservative operating strategy, underwriting expertise, and strong capitalization.
  • Allied Group's Best's Rating has been affirmed at "A+" due to the company's solid operating performance and strong capitalization.

Statistics:

  • Munich American Reinsurance Company and Munich Reinsurance Company reported a combined ratio of 116 in 1994.
  • Prudential Property & Casualty Insurance Company reported $666 million in premiums and $649 million in policyholders' surplus at year-end 1994.
  • Prudential Reinsurance Company reported a depressed operating ratio due to high catastrophe exposures and challenges in expanding its casualty writings.
  • Prudential Reinsurance Company's pending IPO is expected to be executed later this fall.
  • St. Paul Fire & Marine Insurance Company has a strong capitalization ratio.
  • Allied Group has a solid operating performance with a low combined ratio.

Sources:

  • A.M. Best Company
  • PR Newswire
  • Munich American Reinsurance Company
  • Munich Reinsurance Company
  • Prudential Property & Casualty Insurance Company
  • Prudential Reinsurance Company
  • St. Paul Fire & Marine Insurance Company
  • Allied Group