International rating agency AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “aa” of te Swiss Re, the second largest global reinsurer and its rated operating affiliates.
However, the outlook of the Long-Term ICR of the Swiss Re has been revised to negative from stable, while the outlook of the FSR is stable.
At the same time, AM Best has revised the outlook of the reinsurer to negative from stable and affirmed the associated Long-Term Issue Credit Ratings (Long-Term IRs) on the debt and assigned indicative Long-Term IRs on securities available under Swiss Reinsurance Company Ltd’s debt issuance programme.
The Credit Ratings (ratings) reflect AM Best’s assessment of the rating fundamentals of the consolidated Swiss Re Ltd group, namely its balance sheet strength, which AM Best categorises as strongest, as well as its strong operating performance, very favourable business profile and very strong enterprise risk management, said the rating note of AM Best.
The negative outlook on the Long-Term ICR reflects pressure on Swiss Re’s operating performance assessment, following non-life underwriting losses in recent periods, partly driven by the casualty book of business.The group has implemented actions to improve the performance of certain sub-segments of its portfolio. However, these actions have had limited impact on results so far, said AM Best..
AM Best will continue to monitor Swiss Re’s underwriting performance, particularly in the U.S. casualty segment; should the underlying performance not improve in the short-to-medium term, a further negative rating action on the Long-Term ICR is likely.
Swiss Re’s operating performance benefits from good diversification of earnings, which has limited the negative impact of underperformance in areas of the non-life book on the overall results in recent periods. In particular, its life and health operations have demonstrated good profitability over the past few years, as evidenced by a return on equity between 10-15% since 2015. In addition, the group possesses strong asset management capabilities, which help it navigate the prevailing low interest rate environment and financial market volatility.
In the first quarter of 2020, Swiss Re’s performance was adversely affected by COVID-19-related claims, particularly in the event cancellation line of business. Losses related to the pandemic will have a negative impact on the group’s operating results for the year, with the full extent of losses subject to material uncertainty. Nonetheless, AM Best believes that Swiss Re’s balance sheet is resilient to absorb the potential impact, based on its portfolio and market share.
Swiss Re maintains a leading position in the global reinsurance market. In AM Best’s view, the group’s strong brand and excellent geographical diversification partly insulate it from the impact of intense competition in the international reinsurance market and position it well to benefit from the hardening market conditions, said AM Best.
The FSR of A+ (Superior) and the Long-Term ICR of “aa” have been affirmed, with the outlook of the Long-Term ICR revised to negative from stable and the outlook of the FSR maintained at stable, for Swiss Reinsurance Company Ltd and its affiliates including Swiss Re Asia Pte.,Swiss Re Europe S.A.,Swiss Re International SE,Swiss Re Corporate Solutions Ltd,Swiss Re Life & Health America Inc. Swiss Reinsurance America Corporation.