S&P Affirms Swiss Re’s ‘AAA’ Ratings

April 29, 2002

Standard & Poor’s brushed aside Swiss Re’s Sw. Fr. 165 million ($101.3 million) net loss last year, and affirmed its triple-‘A’ counterparty credit and insurer financial strength ratings on the company and its core subsidiaries with a stable outlook.

“The affirmation largely reflects Swiss Re’s extremely strong and sustainable global business position, superior management team, and extremely strong financial flexibility, as demonstrated by the group’s raising of Swiss franc (SFr) 6 billion [$3.68 billion] of capital in November 2001,” stated Stephen Searby, a director at Standard & Poor’s in London.

S&P, however characterized Swiss Re’s “performance in non-life underwriting over the past few years” as “marginal,” particularly in the U.S. The report noted that the results obtained in the life reinsurance sector had been superior, but expressed confidence that the group’s management would remain sufficiently innovative and focused to address the problem.

It concluded that “Swiss Re’s capital position and financial flexibility are major strengths and support the triple-‘A’ ratings. According to Standard & Poor’s risk-adjusted model, capital adequacy, while having fallen during 2001, remains extremely strong.”

S&P also recognized that the precipitate earnings decline, Swiss Re had net income of Sw.Frs. 2.966 billion ($1.82 billion) in 2000, was due in large part to the exceptional events of Sept. 11 and that the company’s financial position “remains strong in the longer term.”

The report concluded that while Swiss Re’s “non-life performance, in line with many of its peer groups, has been marginal over the past few years, this is offset by the strong performance of Swiss Re’s growing life book and consistent realized gains arising on the group’s investment portfolio” It noted that “average ROR and return on adjusted equity over the past six years, excluding the September 11-related losses, are 5.3% and 11%, respectively.”

Searby indicated that S&P expected Swiss Re’s non-life operating performance to improve sharply in 2002 as a result of substantial rate increases, but he warned that,”Nevertheless, the ratings on the group could come under pressure if underwriting performance in 2002 and 2003 does not fully reflect Swiss Re’s business position and the improved underwriting conditions. The ratings on Swiss Re’s core subsidiaries, notably in the U.S., could also be pressured if they underperform relative to the group.”

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