Best Upgrades Swiss Re’s Ratings to ‘A+’; Outlook Stable

A.M. Best Co. has upgraded the financial strength rating (FSR) to ‘A+’ (Superior) from ‘A’ (Excellent) and issuer credit ratings (ICR) to “aa-” from “a+” of Swiss Reinsurance Company Ltd. and its subsidiaries.

Best has also upgraded the senior and subordinated debt of Swiss Re and its subsidiaries. The outlook for all of the ratings has been revised to stable from positive.

Best said the rating upgrades reflect its “acknowledgement of the successful measures taken by Swiss Re following major investment losses in 2008. These measures have reduced the level of risk in Swiss Re’s investment portfolio, which, along with the early payback of the convertible perpetual capital instrument in 2010, have created a more reinsurance focused enterprise.

“The success of these measures is quantified in the strong risk-based capitalization and excellent underwriting results of the group over the past several years.

“The rating upgrades also take into consideration Swiss Re’s limited exposure to the euro zone debt crisis and investments in euro zone banks.”

In addition Best described Swiss Re’s underwriting performance in its non life operations as “strong, with a five-year average combined ratio of 92 percent through 2010. Through the first nine months of 2011, Swiss Re’s non-life operations recorded a combined ratio of 104.6 percent in a year that saw numerous natural catastrophes including the Japan earthquake and tsunami, New Zealand earthquake, Australian floods and U.S. tornado activity. On a relative basis, Swiss Re’s third quarter 2011 combined ratio compares favorably to the market.”

Swiss Re’s life operations in the United States primarily consist of individual and group life reinsurance. Best noted that “although recent growth has been stagnant due to decreases in cession rates, the life operations continue to produce strong underwriting results and consistent net income.

“The risk-based capital position within Swiss Re’s life operations remains adequate as recent earnings have helped bolster the company’s statutory capital. Going forward, the life operations are expected to remain an important source of income and diversification for Swiss Re.

“Swiss Re continues to maintain a dominant position in its chosen markets and benefits from a global franchise with a large selection of products along with a robust worldwide distribution system. The company has established sound client relationships with some of the largest companies in the world while offering larger lines and capacity.”

Best also singled out Swiss Re’s maintenance of a “formal and far reaching risk management program overseeing all aspects of the company’s individual risks. A dedicated risk management team monitors current and developing risks on a worldwide basis.” Best added that it “considers Swiss Re’s current enterprise risk management program to be effective.

“Positive rating actions could occur if over the next several years, Swiss Re’s operating performance and risk-adjusted capitalization consistently exceeds its peer group of global reinsurers by a significant margin.

“Negative rating actions could occur if Swiss Re’s operating performance and consequently its risk-adjusted capitalization falls consistently below expectations for its current rating level by a significant margin for a prolonged period or if capital erosion occurs due to investment volatility or increased risk appetite,” which exceeds Best’s expectations

For a complete listing of Swiss Reinsurance Company Ltd and its subsidiaries’, FSRs, ICRs and debt ratings, please visit www.ambest.com/press/122001swissre.pdf

Source: A.M. Best

Topics Trends Reinsurance Swiss Re