Moody's Downgrades Swiss Re; Outlook Stable

NU Online News Service, May 27, 3:50 p.m. EDT?Moody's Investors Service has downgraded various ratings of Swiss Reinsurance Company and its subsidiaries by one notch, citing several challenges facing the reinsurer including the non-life reinsurance cycle reaching its cyclical peak.[@@]

The ratings actions included the downgrade of Swiss Re's insurance financial strength and senior debt ratings to "Aa2" and the subordinated debt rating to "A1." Additionally, Swiss Reinsurance America Corporation's insurance financial strength and guaranteed senior debt ratings were also lowered to "Aa2" while its guaranteed subordinated debt rating fell to "A1." All ratings now have a "stable" outlook, Moody's noted.

Commenting on various downgrades, the New York-based Moody's said rating changes took into account several challenges facing Swiss Re.

One challenge is the current non-life reinsurance cycle, which is reaching its cyclical peak, according to Moody's. "The company will need to maintain pricing discipline in order to sustain positive underwriting results in the non-life segment as well as to offset the impact of lower investment yields," the ratings firm said.

Moody's also observed that Swiss Re will need to further improve the quality and sustainability of its earnings and enhance its return-on-capital, while maintaining a leverage profile suitable for the "Aa" rating category.

Additionally, Swiss Re needs to continue to closely manage its evolving risk profile, especially its growing life reinsurance and financial intermediation businesses, Moody's said.

The ratings firm cautioned that there is a potential for further adverse reserve development, especially for the underwriting years of 1997 to 2001, in line with others in the non-life reinsurance industry.

However, Moody's also observed that it still recognizes Swiss Re's "numerous strengths."

"With its very strong business diversification, both geographically and by line of business, Swiss Re has an outstanding franchise and is excellently positioned to benefit from a flight to quality in the global reinsurance industry from its leading position as the largest life reinsurer and second largest non-life reinsurer," Moody's said.

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Moody's Downgrades Swiss Re; Outlook Stable

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