Best, S&P Comment on Swiss Re Group’s Results

A.M. Best Co. and Standard & Poor’s Ratings Services have both issued comments on Swiss Re’s 2004 earnings (See IJ Website March 17), indicating that they were in line with the rating agencies’ expectations, and that no changes in Swiss Re’s ratings are being contemplated.

Best noted that “despite Swiss Re’s significant exposure to natural losses (CHF 1.2 billion, USD 1 billion) and strengthening of non-life reserves (CHF 948 million, USD 822 million), year-end 2004 consolidated profitability improved, partially helped by a CHF 241 million (USD 208 million) release of equalisation provisions.” Best said it believes that Swiss Re’s average profitability target of a 96 percent combined ratio for its property/casualty business over 2005 – 2006 and an average return on equity of 13 percent over the cycle “are feasible targets, provided no adverse developments in US liability lines emerge.”

S&P said: “The improved performance for 2004 largely reflects a decrease in net impairments of SFr0.6 billion [$515 million], although underwriting performance also improved.” It also noted the profits and the continued weakness of the U.S. dollar to the Swiss franc, and the maintenance of a combined ratio of 98.4 percent in Swiss Re’s core P/C sector.

“Swiss Re’s underlying 2004 operating performance is in line with that of its global peers, but further improvement relative to the sector over the longer term is required to provide clear evidence that performance is consistent with the level Standard & Poor’s would expect of an entity with Swiss Re’s global franchise strength,” commented S&P credit analyst Simon Marshall.

“In keeping with management’s own expectations, Standard & Poor’s anticipates that Swiss Re’s operating performance will improve further during 2005,” the announcement concluded.