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Rating Action:

Moody's upgrades Swiss Re's ratings (IFSR and Senior debt to Aa3); stable outlook

10 Dec 2013

London, 10 December 2013 -- Moody's Investors Service has upgraded the insurance financial strength (IFSR) and senior debt ratings of Swiss Reinsurance Company Ltd to Aa3 from A1. (See list below for more details). Moody's has also assigned a first-time A1 IFSR to Swiss Re Corporate Solutions Ltd (SRCS), and affirmed the A1 IFSRs of SRCS's subsidiaries Swiss Re International and Westport Insurance Corporation. All ratings have been assigned a stable outlook. Short-term ratings were also affirmed.

RATINGS RATIONALE

Moody's said that the ratings upgrade reflects the Swiss Re Group's ("Swiss Re" or "the Group") improved financial profile notably with respect to profitability and financial flexibility, whilst maintaining an overall excellent market position and strong business diversification.

Swiss Re's Return on Capital (ROC) and reported Return on Equity (ROE) improved in 2012 to 10.3% (YE11: 6.9%) and 13.4% (YE11: 9.6%) respectively, following its performance in 2011 that compared well with a number of peers. The Group's good profitability has continued into 2013 with a reported ROE of 13.6%, and we now see little uncertainty and very small potential cost implications regarding the Group's legacy exposures related to former financial services activities which significantly impacted the Group's results in 2008.

Swiss Re's financial leverage has continued to reduce, with adjusted financial leverage relatively low at around 20.4% at 9m 13 (YE12: 21.4%), and although in contrast to most of its peers, Swiss Re continues to have a relatively high level of operational debt, the amount has consistently and meaningfully reduced from 2010. Also, the Group's earnings coverage in 2013 and 2012 has been relatively high, and the Group's financial flexibility continues to be enhanced by its very good access to capital markets.

Swiss Re's capital adequacy remains strong. Capitalisation metrics benefited during 2012 from the 7% increase in the Group's total equity, with gross underwriting leverage improving to 2.6x (YE11: 2.8x). Equity has reduced by around 6% during 2013, driven by a reduction in unrealized investment gains, but the Group's Swiss Solvency Test (SST) ratio, as filed at the end of October 2013, remains high at 229% compared to the Group's target of 185%.

At 9m 13, the Group's investment portfolio was relatively conservative with 53% invested in either cash, short-term investments or government bonds. This is notwithstanding an increase in asset risk during 2013, in order to enhance the Group's Life & Health ROE, involving an acceleration towards its mid-term asset mix plan with an increase in mainly corporate bonds at the expense of government bonds, and equities.

Going forward, we expect capital adequacy to remain strong and with the Group's rebalancing of its investment portfolio largely complete, we do not expect a material increase in high risk assets. Whilst noting that the Group's results in recent years have benefited from significant realized gains and reserve releases, we also expect the Group's ROC and ROE performance to remain good, but not at the same level as 2012 and 2013YTD. Swiss Re, like other reinsurers, currently faces a difficult trading environment with still low investment yields a feature, and reinsurance pricing, especially for catastrophe business, is generally under pressure. Furthermore, one of the current credit challenges for Swiss Re is managing its pre-2004 US Individual Life portfolio, which has been generating losses since 2007, and which the Group currently expect will lead to a US GAAP charge of USD 500 million in 2014. In light of this and the Group's catastrophe exposure, we expect Swiss Re to show some volatility in its results going forward. However, the rating upgrade reflects our expectation that the Group's performance will, as a consequence of continuing to focus on its core underwriting activities, not exhibit the volatility seen in earlier years.

The assignment of a A1 IFSR to SRCS, and the affirmation of the A1 IFSRs of Swiss Re International and Westport Insurance reflect the good stand-alone credit fundamentals of Swiss Re's growing and profitable commercial insurance business, as well as implicit support from the ultimate parent. Absent such support , the stand-alone credit profile would be one notch lower. However, the ratings are not fully aligned with Swiss Re' IFSR in light of the still relatively small contribution of this non-reinsurance business to the Group's overall premium-- at 9m 2013, Swiss Re's Corporate Solution business contributed around 10% of the Group's gross premiums written.

With regard to rating drivers going forward, the rating agency said although it currently sees little potential for further upward pressure on the ratings in the short term, the following factors would further augment the Group's credit profile: sustained strong core earnings with return on capital above 12% over the underwriting cycle, consistently low adjusted financial leverage below 15% with earnings coverage over 10x through the cycle, enhanced capital adequacy including reduced gross underwriting leverage to below 2.5x. Conversely, negative rating pressure could arise from: reduction in shareholders' equity of >10% over a rolling 12 month period due to catastrophe losses or poor operating results; adjusted financial leverage consistently above 25%; earnings coverage consistently below 6x; average return on capital over the underwriting cycle below 6%; significant deterioration in asset quality.

The following ratings were upgraded and assigned a stable outlook:

Swiss Reinsurance Company Ltd- insurance financial strength rating to Aa3 from A1, senior debt rating to Aa3 from A1, subordinated debt rating to A2 (hyb) from A3 (hyb), EMTN program senior debt rating to (P)Aa3 from (P)A1, EMTN program subordinated debt rating to (P)A2 from (P)A3;

European Reinsurance Company of Zurich - insurance financial strength rating to Aa3 from A1, guaranteed EMTN program senior debt rating to (P)Aa3 from (P)A1, guaranteed EMTN program subordinated debt rating to (P)A2 from (P)A3;

Swiss Re Europe SA - insurance financial strength rating to Aa3 from A1;

Swiss Re Finance (Luxembourg) S.A. - guaranteed senior debt rating to Aa3 from A1, guaranteed EMTN program senior debt rating to (P)Aa3 from (P)A1, guaranteed EMTN program subordinated debt rating to (P)A2 from (P)A3;

Swiss Re America Holding Corporation - guaranteed senior debt rating to Aa3 from A1

Swiss Reinsurance America Corporation - insurance financial strength rating to Aa3 from A1;

Swiss Re Life and Health America Inc.- insurance financial strength rating to Aa3 from A1;

Swiss Re Financial Products Corporation -- issuer rating to Aa3 from A1;

Swiss Re Solutions Holding Corporation - senior unsecured debt to A2 from A3 (not guaranteed);

Swiss Re Treasury US - guaranteed senior debt rating to Aa3 from A1, guaranteed EMTN program senior debt rating to (P)Aa3 from (P)A1, guaranteed EMTN program subordinated debt rating to (P)A2 from (P)A3;

Swiss Re Capital I LP- guaranteed junior subordinated rating to A3 (hyb) from Baa1(hyb);

Elm BV - junior subordinated rating to A3 (hyb) from Baa1 (hyb) for notes issued by ELM BV and secured over notes of Swiss Reinsurance Company.

The following ratings were affirmed:

Westport Insurance Corporation - insurance financial strength rating A1;

Swiss Re International SE - insurance financial strength rating A1;

Swiss Reinsurance Company Ltd -- EMTN program short-term debt rating (P)P-1

European Reinsurance Company of Zurich -- EMTN program guaranteed short-term debt rating (P)P-1

Swiss Re Finance (Luxembourg) S.A. -- EMTN program guaranteed short-term debt rating (P)P-1

Swiss Re Treasury US -- EMTN program guaranteed short-term debt rating (P)P-1

The following rating was assigned with a stable outlook;

Swiss Re Corporate Solutions Ltd -- A1 insurance financial strength rating

Swiss Re, headquartered in Zurich, Switzerland reported gross premiums written of USD 25.3 billion, total equity of USD 31.9 billion and net income of USD 3. billion as at 9m, 2013.

The principal methodologies used in these ratings were Moody's Global Rating Methodology for Reinsurers published in December 2011, and Moody's Global Rating Methodology for Property and Casualty Insurers published in May 2010. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt 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 rating action on the support provider and in relation to each particular 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 rating action, and whose ratings may change as a result of this 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 person who approved Swiss Reinsurance Company Ltd, European Reinsurance Company of Zurich, Swiss Re Europe SA, Swiss Re Finance (Luxembourg) S.A., Swiss Re Corporate Solutions Ltd, Swiss Re International SE, ELM B.V. and Swiss Re Capital I LP credit ratings is Simon Harris, MD - Financial Institutions, Financial Institutions Group, JOURNALISTS: 44 20 7772 5456, SUBSCRIBERS: 44 20 7772 5454

The person who approved Swiss Reinsurance America Corporation, Swiss Re Financial Products Corporation, Swiss Re Solutions Holding Corporation, Westport Insurance Corporation, Swiss RE America Holding Corporation and Swiss Re Treasury (US) Corporation credit ratings is Stanislas Rouyer, Associate Managing Director, Financial Institutions Group, JOURNALISTS: 212-553-0376, SUBSCRIBERS: 212-553-1653

The person who approved Swiss Re Life & Health America Inc. credit rating is Robert Riegel, MD - Insurance, Financial Institutions Group, JOURNALISTS: 212-553-0376, SUBSCRIBERS: 212-553-1653

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 analyst and the Moody's legal entity that has issued the ratings.

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

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 - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Simon Harris
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 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
SUBSCRIBERS: 44 20 7772 5454

Moody's upgrades Swiss Re's ratings (IFSR and Senior debt to Aa3); stable outlook
No Related Data.
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