Moody's Lowers Outlook for Swiss Re
NU Online News Service, April 8, 1:48 p.m. EST?Moody's Investors Service announced today that it has lowered the outlook for its"Aa1″ insurance financial strength rating on Swiss Reinsurance Company and subsidiaries to "negative" from "stable."
For its outlook change, the New York-based rating agency cited three main factors: the negative trend in the company's profitability; the falling capital position; and a worry that Swiss Re's strong market position would not guarantee superior operating performance.
"The negative outlook reflects Moody's concerns that Swiss Re's operating profitability for 2003 may continue to be below pre-2001 levels and not in line with Moody's expectations of superior profitability, both in terms of amounts and stability, for issuers rated 'Aa1,'" the rating agency stated.
Late last month, the Zurich, Switzerland-headquartered reinsurance giant reported a net loss of 91 million Swiss francs, or roughly $58.26 million, for 2002, which is better than the loss of 165 million Swiss francs ($105.65 million) it reported the year before.
On the plus side, Moody's noted Swiss Re's "skillful management" of its capital position, as well as the company's reduced leverage and risk profile. The rating agency also mentioned a couple other positive factors: potential for better underwriting, as Swiss Re forecasts an average non-life combined ratio of 98 percent for the period 2003-05; and a very small exposure to equities markets, which helps the company weather the investment market volatility.
Moody's said it expects Swiss Re's profitability to rebound significantly in the coming years. Still, the rating agency will keep a very close eye on the reinsurer.
If it sees any troubling sign that shows Swiss Re's operating performances are not top quality, the rating agency noted, that would "likely lead to a reconsideration of the group's ratings."
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