LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating (FSR) of A+ (Superior) and the issuer credit ratings of “aa-” of Swiss Reinsurance Company Ltd (Switzerland) and its European affiliates: European Reinsurance Company of Zurich Ltd (Switzerland), Swiss Re Europe S.A. (Luxembourg), Swiss Re International SE (Luxembourg) and Swiss Re Corporate Solutions Ltd (Switzerland). At the same time, A.M. Best has affirmed the related debt ratings of Swiss Reinsurance Company Ltd and its subsidiaries. The outlook for all ratings remains stable. (See link below for a detailed list of debt ratings).
The Swiss Re group (Swiss Re) benefits from excellent consolidated risk-adjusted capitalisation, a superior business profile and strong performance in recent years. These positive rating factors are partially offset by the group’s exposure to earnings volatility from catastrophe and large losses, as well as deteriorating market conditions in the property reinsurance market. Swiss Re’s underperformance within some segments of its U.S. life reinsurance book is also a partially offsetting factor. The group has taken measures to improve performance in these segments, but these have not yet been fully implemented.
Swiss Re is expected to continue to benefit from excellent consolidated risk-adjusted capitalisation and strong financial flexibility. The group’s risk-adjusted capitalisation is enhanced by hybrid debt, including several contingent capital instruments issued in the last few years, which improve financial flexibility.
The group’s overall performance in recent years has been strong, led by outperformance in the Property & Casualty Reinsurance segment. A.M. Best expects Swiss Re to continue to report strong results in this segment, although the level of profitability is likely to decline compared with 2012 and 2013, reflecting market softening and consequent weaker pricing and a return to normal catastrophe experience. The group’s other business segments – Life & Health Reinsurance, Corporate Solutions and Admin Re – are expected to continue to contribute positively to the group’s overall result. Performance in Life & Health Reinsurance has been affected by some underperforming U.S. portfolios and from reserve strengthening for Australian disability reinsurance. The group is putting measures in place to improve the performance of this segment, but these have not yet been fully implemented.
The ratings also reflect Swiss Re’s position as a leading global reinsurer, which is underpinned by a wide product offering and a worldwide distribution system. The group’s Reinsurance segment is well-diversified by line of business and geography. Moreover, the group’s product offering is further enhanced by the primary insurance business underwritten by Corporate Solutions, as well as Admin Re’s capabilities within the closed block life business segment. The group’s superior business profile and strong relationships with reinsureds allow it to write private deals and contracts on differentiated terms, which improve profitability and offer protection against the competition from alternative capital providers.
Positive rating actions could follow if Swiss Re’s consolidated risk-adjusted capitalisation remains strong, the Property & Casualty Reinsurance business continues to perform well through the depressed stage of the reinsurance cycle and if the group’s efforts to improve the profitability within its Life & Health Reinsurance segment prove effective.
Negative rating actions are unlikely, but could follow if Swiss Re’s operating performance and risk-adjusted capitalisation consistently falls below A.M. Best’s expectations.
For a detailed listing of related debt ratings, please visit Swiss Re.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilised:
- A.M. Best’s Perspective on Operating Leverage
- Analyzing Insurance Holding Company Liquidity
- Catastrophe Analysis in A.M. Best Ratings
- Equity Credit for Hybrid Securities
- Insurance Holding Company and Debt Ratings
- Rating Members of Insurance Groups
- Risk Management and the Rating Process for Insurance Companies
- Understanding Universal BCAR
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
This rating announcement has been issued by A.M. Best Europe – Rating Services Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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