Best Lowers Swiss Re Rating
NU Online News Service, Oct. 17, 4:42 p.m. EDT, London?Swiss Re's financial strength rating has been lowered to "A plus" from "A plus plus " by A.M. Best Co., which also changed the outlook for the company from stable to negative. At the same time, A.M. Best has downgraded the ratings on all debt instruments issued by Swiss Re's group entities.
Despite earnings improvement in the first half of 2003, "Swiss Re's prospective consolidated earnings are unlikely to be supportive of an A plus plus consolidated risk-based capital level throughout the cycle, especially after the reduction suffered from historic levels," said the Oldwick, N.J. ratings agency.
"Although the existing risk-based capital base could be viewed as being at an A plus plus level, the degree of reliance on ?lower quality' or ?soft' capital (i.e., deferred acquisition costs, present value of future profits and hybrid debt) in part mitigates this," the agency said, noting that its view of Swiss Re's risk-adjusted capitalization also reflects the historical stability of the reinsurer's claims reserves.
A.M. Best also said the improvement in the reinsurer's property-casualty underwriting performance with a combined ratio of 99.8, down from 104 at year-end 2002, reflects "a relatively slow turnaround given the market conditions."
"Swiss Re is financially very strong, a highly regarded quality by our clients, who seek the security of our balance sheet when purchasing insurance/reinsurance," said Michael McNamara, a Swiss Re representative, in a statement. "This was recognized by A.M. Best which states Swiss Re's 'current capital could be viewed as being at an A plus plus level.' In fact, Swiss Re's capital strength continues to grow, in the first half 2003, shareholders equity grew CHF 1.2 billion to CHF 17.9 billion [$899 million to $13.4 billion]."
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