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Rating Action:

Moody’s affirms Swiss Re’s Aa3 IFS and senior unsecured debt ratings with stable outlook

06 May 2020

London , May 6, 2020 – Moody's Investors Service, ("Moody's") has affirmed the Aa3 insurance financial strength (IFS) and senior unsecured debt ratings of Swiss Reinsurance Company Ltd (SRZ). In the same action, Moody's has affirmed the Aa3 IFS and A2(hyb) subordinated debt ratings of Swiss Re Corporate Solutions Ltd (SRCS), and the Aa3 IFS ratings of Swiss Re Life & Health America Inc. (SRLHA) and Swiss Reinsurance America Corporation (SRAC). The outlook is stable.

SRZ is the lead reinsurer of Swiss Re Ltd. ("Swiss Re", or "the Group"), one of the leading global reinsurance groups.

Please click on this link https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1000002784 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and identifies each affected issuer.

RATINGS RATIONALE

The affirmation of the Aa3 IFS rating of SRZ, Swiss Re's lead reinsurance entity, reflects its excellent market position and extensive diversification by geography and line of business, very strong capital adequacy and good reserve adequacy. Swiss Re's financial profile is further strengthened by its conservative investment portfolio and very good financial flexibility, albeit earnings coverage has come under some pressure given the Group's weakened profitability. The Group's profitability has deteriorated over the past three years as a result of underwriting losses on its property and casualty (P&C) businesses, in part due to catastrophe losses but also adverse reserve development associated with its large market share in commercial casualty (re)insurance. The affirmation also takes into consideration Moody's expectation that Swiss Re's credit profile, given its current risk exposures, will be able to withstand the negative financial effects of the coronavirus pandemic, and potential underwriting losses will not drive a net loss for the year under a range of moderate stress scenarios.

The coronavirus-related economic downturn is creating a severe and extensive credit shock across many sectors, regions and markets. The reinsurance industry is exposed to this shock from both potential underwriting claims as well as asset volatility. We regard the coronavirus pandemic a social risk under our ESG framework, given the substantial implications for public health and safety.

For the Group's Life (re)insurance focused businesses, the coronavirus pandemic results in increased mortality risk, with significantly higher death rates in older age groups, and thus the potential for elevated mortality claims against life (re)insurers. The largest concentration of reinsured mortality risks is in the United States and – to a lesser extent – the United Kingdom, Canada and Australia, whereas in other regions reinsurance coverage is more widely used against longevity and morbidity risks. Moody's expects the mortality rate within insured populations to be lower than for the general population due to a mix of factors, including the generally younger age of insureds, socio-economic characteristics, and the effectiveness of medical underwriting in moderating the number of insureds with significant underlying health conditions, who tend to be more susceptible to coronavirus.

Swiss Re has a leading position in the global market for life reinsurance and therefore carries significant mortality risk. At year-end 2019, Life and Health insurance (including the Group's Life Capital division) accounted for about 39% of its total premium earned and fee income and about 27% of the Group's undiversified economic capital requirement on the Swiss Solvency Test (SST) basis. Its 1-in-200 year modeled pandemic loss - which contemplates a significantly more severe pandemic than coronavirus - amounted to $3.1 billion.

Moody's has applied various scenarios to the Group's global life reinsurance inforce, with our base scenarios ranging between a 2% infection rate at the low end to a 10% infection rate at the upper-end, with an average fatality rate of 1% across the population. Moody's expects Swiss Re to remain resilient across our coronavirus-related range of base mortality scenarios. However, in more severe stress scenarios, of higher infection and mortality rates, which are considered a remote possibility based on the current trajectory of the pandemic and the current success of containment measures, the Group's credit profile could come under pressure.

On the P&C side, reinsurers are also significantly exposed to coronavirus related risks, the most important of which are event cancellation, business interruption, trade credit and mortgage insurance, which in the short-term could be partially offset by lower claims from lines of business dependent on usage, such as motor insurance. More specifically for business interruption insurance, while there is some disparity in policy wording amongst insurers, these claims are generally triggered by property damage and Moody's generally believes this risk to be manageable, assuming policymakers do not force retrospective changes to policy wording to include previously excluded business interruption losses. Swiss Re has a very well diversified book of business and while the earnings of its P&C reinsurance business will suffer from coronavirus related claims, we do not expect these claims to cause the P&C Re division to report an overall loss for the year under our range of base scenarios for P&C claims.

For Q1 2020, the Group recorded a $476 million pre-tax charge for coronavirus-related claims against its P&C businesses, event cancellation covers accounting for the majority of this amount. The Group estimates its total event cancellation exposure as being in the mid-to-high triple digit millions range.

Moody's expects the impact of financial markets volatility to be limited because the Group's investment portfolio is conservatively positioned with only modest exposure to equities and lower rated debt. The Group reported net mark-to-market losses of approximately $300 million for the first quarter of 2020, with the gross impact reduced by approximately $650 million as a result of equity and credit hedges the Group had in place to reduce its exposure to financial markets volatility related to the pandemic. Notwithstanding the group's high-quality investment portfolio, and effective equity and credit hedging strategy, the economic and financial effects of coronavirus exposes Swiss Re to elevated levels of asset risk in a severe stress scenario.

On 30 April 2020, Swiss Re reported first-quarter earnings with a net loss for the quarter of $225 million, reflecting the aforementioned P&C claims and mark-to-market losses related to coronavirus and higher than expected natural catastrophe losses. The Group stated that its SST coverage ratio remained comfortably above 200%. Moody's said that it expects the Group to record additional coronavirus-related claims over the course of 2020, including on credit and surety lines, business interruption and events cancellation as well as on its life reinsurance business.

STABLE OUTLOOK

The stable outlook for the Group's rated entities reflects Moody's expectation that Swiss Re's credit profile will withstand the negative effects of the coronavirus pandemic, including its SST capital coverage not declining below 200% for a prolonged period. In addition, Moody's expects that the Group's underlying profitability will benefit from rising prices for P&C reinsurance and the Group's restructuring of its loss-making SRCS division. As noted below, the inability of the Group to improve its profitability – absent the expected impacts of coronavirus – over the next 12 to 18 months could result in negative rating action.

KEY SUBSIDIARY RATINGS

Moody's said that the Group's main rated subsidiaries, Swiss Reinsurance America Corporation (SRAC, Aa3 stable), Swiss Re Life & Health America Inc. (SRLHA, Aa3 stable) and Swiss Re Corporate Solutions Ltd (SRCS, Aa3 stable) benefit from significant implicit and explicit support from the Group that supports their ratings being aligned with SRZ.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Moody's said that given the significant uncertainty around the ultimate industry losses related to coronavirus, there would be limited upward pressure on SRZ and the Group's ratings over the next 12 to 18 months. However, over the longer term, the following factors could contribute to positive pressure on the rating: (i) increased diversification of earnings streams resulting in lower potential earnings volatility, (ii) sustained strong core earnings with return on capital above 10% over the underwriting cycle, while maintaining very strong capital adequacy, (iii) financial and total leverage consistently below 20%, with earnings coverage over 10x through the cycle, and (iv) material improvement in the business environment, including P&C reinsurance pricing and interest rates.

Conversely, Moody's said that the following factors could place downward pressure on SRZ and the Group's ratings: (i) higher than expected life or non-life reinsurance claims related to coronavirus that erode capital; (ii) return on capital remaining below 6% - absent the expected coronavirus-related impacts – over the next 12 to 18 months; (iii) meaningful and sustained adverse reserve development; (iv) increase in the Group's risk appetite, including for higher net catastrophe exposure or asset risk; (v) reduction in shareholders' equity of greater than 10% over a rolling 12 month period due to weak underwriting results or excess return of capital to investors.

The principal methodology used in rating Swiss Re Corporate Solutions Ltd, Swiss Re International SE and Westport Insurance Corporation was Property and Casualty Insurers Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187352 . The principal methodology used in rating Swiss Reinsurance Company Ltd, ELM B.V., Swiss Re Financial Products Corporation, Swiss Re Life & Health America Inc., Swiss Re Solutions Holding Corporation, Swiss Re Treasury (US) Corporation, Swiss Reinsurance America Corporation, Swiss Re Asia Pte. Ltd., Swiss Re Europe SA and Swiss Re Finance (Luxembourg) S.A. was Reinsurers Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187551 . Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

The List of Affected Credit Ratings announced here are a mix of solicited and unsolicited credit ratings. Additionally, the List of Affected Credit Ratings includes additional disclosures that vary with regard to some of the ratings. Please click on this link https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1000002784 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and provides, for each of the credit ratings covered, Moody's disclosures on the following items:

• Endorsement

• Releasing Office

• Rating Solicitation

• Issuer Participation

• Participation: Access to Management

• Participation: Access to Internal Documents

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004 .

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569 .

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead rating analyst and the Moody's legal entity that has issued the ratings.

The person who approved Swiss Re Corporate Solutions Ltd, Swiss Re International SE, Westport Insurance Corporation, Swiss Reinsurance Company Ltd, ELM B.V., Swiss Re Asia Pte. Ltd., Swiss Re Europe SA and Swiss Re Finance (Luxembourg) S.A. credit ratings is Simon Harris, MD-Gbl Financial Institutions, Financial Institutions Group, JOURNALISTS : 44 20 7772 5456, Client Service : 44 20 7772 5454. The person who approved Swiss Re Financial Products Corporation, Swiss Re Life & Health America Inc., Swiss Re Solutions Holding Corporation, Swiss Re Treasury (US) Corporation and Swiss Reinsurance America Corporation credit ratings is Marc R. Pinto, CFA, MD-Financial Institutions, Financial Institutions Group, JOURNALISTS : 1 212 553 0376, Client Service : 1 212 553 1653.

The relevant office for each credit rating is identified in "Debt/deal box" on the Ratings tab in the Debt/Deal List section of each issuer/entity page of the website.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Dominic Simpson
VP-Sr Credit Officer
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London
United Kingdom
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

Simon Harris
MD-Gbl Financial Institutions
Financial Institutions Group
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

Releasing Office :
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London, E14 5FA
United Kingdom
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody’s investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

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MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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