Fitch Ratings has affirmed Swiss Reinsurance Company's (Swiss Re) Long-term Issuer Default rating (IDR) and insurer financial strength (IFS) rating at 'AA-' (AA minus). The Outlooks for both ratings are Stable. Fitch has also affirmed Swiss Re's convertible securities rating, Swiss Re Solutions Holding Corp's issue ratings and Employers Reinsurance Corporation's IFS rating; and affirmed Reassure America Life Insurance Co's IFS rating (detailed below).
The affirmation of the ratings follows Swiss Re's announcement that it has written down CHF 1.2 billion pre-tax, or CHF 981 million after tax, from the value of two credit default swaps written by its Credit Solutions unit. The loss is primarily due to exposure to asset backed securities (ABS) in the form of collateralised debt obligations (CDOs) with a par value of CHF 953m that has been written down to zero.
In spite of the write-down and the sudden announcement of the exposure, Fitch has affirmed Swiss Re's ratings, as the agency considers the size of the write-down to be immaterial to the group. The write-down is equivalent to only 0.7% of the group's total investments as of 30 September 2007 and 25% of the profit before tax realised by Swiss Re in the first nine months of 2007 (CHF 4,923m).
Despite the profit realised in January-September 2007, the write-down and the continuing share buy-back programme have combined, in Fitch's view, to reduce Swiss Re's capital adequacy. Nevertheless, Fitch views Swiss Re's capital as continuing to support a 'AA-' (AA minus) rating, should no more losses be incurred.
The ratings are as follows:
Swiss Re:
Long-term IDR: affirmed at 'AA-' (AA minus); Outlook Stable
6.13% mandatory convertible securities due 2007: affirmed at 'A+'
Insurer financial strength affirmed at 'AA-' (AA minus); Outlook Stable
Reassure America Insurance Co. (formerly Reassure America Life Insurance Co.): --IFS: affirmed at 'AA-' (AA minus)
Issue Ratings:
Swiss Re Solutions Corp. (formerly GE Insurance Solutions Corp.)
Long-term IDR: affirmed 'A+';
7.00% senior unsecured notes due 2026: affirmed at 'A'
6.45% senior unsecured notes due 2019: affirmed at 'A'
7.50% senior unsecured notes due 2010: affirmed at 'A'
7.75% senior unsecured notes due 2030: affirmed at 'A'
Employers Reinsurance Corporation:
IFS: affirmed at 'AA-' (AA minus)
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