As the global reinsurance market trudges on with heavy competition, consolidation pressures and low interest rates, Munich Re has held its own. For that reason, A.M. Best affirmed its financial strength ratings and argued the company is poised to have “robust” earnings in 2016.

“Taking into account the company’s performance during the first half of the year, A.M. Best expects Munich Re to report robust, albeit lower earnings, for 2016,” the ratings agency said.

A.M. Best affirmed Munich Re’s financial strength rating of A+ (Superior), as well as the long-term issuer credit ratings of “aa-” for the insurer and its subsidiaries. As well, A.M. Best affirmed the long term issuer credit rating of “a-” for Munich Re America, among other affirmations. The German reinsurer has also been granted a stable outlook by A.M. Best.

A.M. Best said that Munich scored well in a number of areas, including its “excellent risk-adjusted capitalization, strong competitive market position, resilient operating performance and robust risk management framework.”

“Despite increasingly competitive conditions in its core markets and persistently low interest rates globally, Munich Re continues to perform well, helped recently by a low incidence of natural catastrophe losses in its property/casualty reinsurance division and the positive run-off of prior years’ underwriting business,” A.M. Best wrote.

The ratings agency noted that low interest rates and soft reinsurance market conditions aren’t new challenges for reinsurers, but also there is no sign of conditions changing, with prospective earnings likely to face some pressure because of this. Even so, Munich Re has performed well, A.M. Best said.

“Munich Re is expected to maintain a solid operating performance through the underwriting cycle, supported by the excellent diversification of its [insurance/reinsurance] portfolio, its solid distribution network and its conservative management philosophy,” A.M. Best noted.

There are caveats, of course. A.M. Best noted that Munich Re’s Ergo group, in the midst of a turnaround plan, is likely to report weak 2016 results.

In August, Munich Re reported $1.08 billion in net income for its second quarter, down from the same period in 2015, but the world’s second largest reinsurer beat analysts’ expectations thanks, in part to currency gains and investments that helped balance out Ergo restructuring costs and higher natural disaster claims.

Source: A.M. Best