December 8, 2016 / 4:19 PM / 8 months ago

Fitch Affirms Swiss Re's IFS at 'AA-'; Outlook Stable

(The following statement was released by the rating agency) LONDON, December 08 (Fitch) Fitch Ratings has affirmed Swiss Reinsurance Company Limited's (Swiss Re) Insurer Financial Strength (IFS) Rating at 'AA-' and Long-Term Issuer Default Rating (IDR) at 'A+'. Fitch has also affirmed the ultimate holding company Swiss Re Ltd. at an IDR of 'A'. The Outlooks are Stable. A full list of rating actions is at the end of this commentary. KEY RATING DRIVERS The affirmation reflects the strength of Swiss Re's financial profile, dominant position within the global reinsurance sector and very strong risk-adjusted capitalisation. Fitch regards Swiss Re's reinsurance operation as one of a very select group that have the scale, diversity and financial strength to attract the highest quality business being placed into the global reinsurance market. This should provide high resilience to softening pricing conditions that are being reported across several reinsurance classes. Fitch expects Swiss Re's P&C reinsurance business to remain the core earnings generator for the foreseeable future. The company's main business segment has consistently achieved strong results, both on an absolute basis and compared with peers, reflecting a depth of underwriting experience and strong diversity by reinsurance class. P&C reinsurance reported a 9M16 combined ratio of 93.8% (9M15: 84.5%), benefitting from lower-than-expected natural catastrophe claims and favourable prior-year developments. Life and health (L&H) reinsurance performance continues to deliver strong results, with a 9M16 net operating margin of 11% (9M15: 13.7%). With a return on equity (ROE) for 9M16 of 12.5%, the reinsurer is on target to achieve its 10%-12% ROE target for 2016. Fitch views capitalisation as very strong based on the agency's Prism Factor Based Model (FBM). The strength of Swiss Re's capital position has led the reinsurer to commence a share buy-back programme on 4 November 2016. Fitch recognises that the current operating environment remains challenging for Swiss Re and the wider (re)insurance industry. Persistently low interest rates and increasingly intense competition, especially in non-life reinsurance, continue to drive price softening across certain major reinsurance classes. The agency expects Swiss Re's diversified business profile and prudent underwriting policy to help the reinsurer weather a protracted period of price softening, should this occur. RATING SENSITIVITIES The key rating drivers that could result in an upgrade include reduced financial leverage under 15% (end-2015: 22%) ; the company's risk-adjusted capital position increasing to 'extremely strong', as measured by Fitch's Prism FBM; maintaining strong underwriting performance relative to similarly rated peers. The key rating drivers that could result in a downgrade include increased financial leverage above 25%; a sustained material drop in the company's risk-adjusted capital position to below 'very strong', as measured by Fitch's Prism FBM, or material underperformance relative to similarly rated peers FULL LIST OF RATING ACTIONS Swiss Reinsurance Company Ltd IFS Rating: affirmed at 'AA-'; Outlook Stable Long-Term IDR: affirmed at 'A+'; Outlook Stable Senior unsecured debt: affirmed at 'A+' Swiss Re Corporate Solutions Ltd IFS Rating: affirmed at 'AA-'; Outlook Stable Long-Term IDR: affirmed at 'A+'; Outlook Stable Subordinated debt affirmed at 'A-' Swiss Re Treasury (US) Corp. Senior notes affirmed at 'A+' Aquarius + Investments PLC Subordinated debt (XS0897406814) affirmed at 'A-' Contingent write-off note (XS0901578681) affirmed at 'BBB+' Cloverie PLC Subordinated debt affirmed at 'A-' ELM B.V. Subordinated debt affirmed at 'A-' Swiss Re Ltd Long-Term IDR: affirmed at 'A'; Outlook Stable Demeter Investments B.V. Subordinated debt affirmed at 'BBB' (XS1261170515, XS1389124774, XS1423777215) Contact: Primary Analyst Graham Coutts Director +44 20 3530 1654 Fitch Ratings Limited 30 North Colonnade London, E14 5GN Secondary Analyst Stephan Kalb Senior Director +49 69 768 076 118 Committee Chairperson Chris Waterman Managing Director +44 20 3530 1168 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 15 Sep 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1016127 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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