S&P Cuts Swiss Re

Standard & Poor’s Ratings Services lowered its long-term counterparty credit and insurer financial strength ratings on Zurich-based global reinsurer Swiss Reinsurance Co. and related core subsidiaries of the Swiss Re group to “AA” from “AA+.” The outlook is stable.

The action reflects the slower than expected recovery in Swiss Re’s earnings and the impact this may have on the group’s ability to fully replenish capital during the current hard phase of the cycle. Nevertheless, the ratings remain underpinned by Swiss Re’s very strong business position, superior management team, and very strong financial flexibility (defined as the ability to source capital relative to requirements).

The stable outlook is based on S&P’s expectation that the group will maintain or improve its business position in the life reinsurance market over the longer term as it exports the roll out of a well-established and successful business model into new territories.

It is expected that there will be further improvement in the combined ratios of the property/casualty and financial services business groups to the target levels of 100 percent and 95 percent, respectively, for 2003. S&P’s considers this prospective performance to be strong, but not yet consistent with a rating in the “AA” range at the current stage in the cycle. However, this is partly mitigated by continued very strong and stable profitability from the life and health business group.