NU Online News Service, Oct. 28, 1:51 p.m. EST
Swiss Reinsurance Co. Ltd. has regained a credit rating of AA-minus from Standard & Poor's, which says the Zurich-based reinsurer successfully de-risked its asset portfolio.
“Swiss Re has reduced its exposure to market risk substantially by taking a more duration-matched position and keeping its equity exposure at low levels relative to other asset classes,” S&P says. “At the same time, it has maintained very strong liquidity and high levels of cash.”
Risky investments caused S&P to lower Swiss Re's double-A rating two years ago, as the company received a $2.6 billion injection from Berkshire Hathaway and replaced its chief executive.
Swiss Re repaid Berkshire late in 2010, shortly after announcing a reorganization of senior leadership.
S&P says Swiss Re has maintained its excess-capital position and stabilized net income, which will be impacted by $2.6 billion in catastrophe losses this year.
“In our view, Swiss Re's substantial excess capital position, relative to our ratings, coupled with its position as a market leader, is a marked competitive advantage to the group during a period of high financial stress,” S&P says.
Swiss Re's combined ratio for the non-life reinsurance segment is expected to be “significantly below” industry expectations of between 105 and 110, S&P says.
However, Swiss Re's financial flexibility is a “relative credit weakness” because it relies on its active use of capital markets for financing and hedging risk.
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