S&P’s Revises Swiss Reinsurance Co. Outlook to Negative

February 28, 2003

Standard & Poor’s has revised its outlook on Swiss Reinsurance Co. and related core subsidiaries of the Swiss Re group (Swiss Re) to negative from stable, after the group gave indications of its 2002 results and an overview of its 2003 renewals. At the same time, Standard & Poor’s affirmed the ‘AA+/A-1+’ counterparty credit and ‘AA+’ insurer financial strength ratings on the group.

“The outlook revision reflects the weaker than expected 2003 renewals and that expected profits for 2002 will fall short of Standard & Poor’s expectations,” Standard & Poor’s credit analyst Stephen Searby said. “It also reflects a further reduction in capital adequacy due primarily to falls in the equity markets during 2002 and, consequently, somewhat reduced financial flexibility – that is, the ability to source additional capital when required.”

Nevertheless, the ratings continue to be supported by the group’s extremely strong and sustainable global business position, particularly in the life reinsurance business, and Swiss Re’s superior management team. In addition, the group’s investments are well positioned to withstand further turmoil in the capital markets.

On the basis of a number of recent announcements concerning the 2003 reinsurance renewals season, including that of Swiss Re, Standard & Poor’s believes that reinsurance premium rates in certain business lines are somewhat softer at this stage in the cycle than originally expected. Furthermore, it is estimated that the combined ratio for the Property and Casualty Business Group will be in the region of 100 percent in 2003, with further improvement in 2004.

“Although these levels of performance represent a significant improvement on recent years, they may not be sufficient in the absence of a significant improvement in the investment market conditions to replenish capital sufficiently to sustain the ratings at the current level,” Searby said. “Failure to maintain a combined ratio materially below 100 percent for an extended period of time on the basis of the current environment may therefore cause the ratings to be lowered.”

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