No Rating Change for Swiss Re Following Write-Downs Says S&P

May 7, 2008

Standard & Poor’s Ratings Services has said that its ‘AA-‘ long-term counterparty credit and insurer financial strength ratings on Swiss Re “are unaffected by its disclosure, as part of its first-quarter 2008 earnings announcement (See IJ web site –, that the group has incurred a further Swiss franc (CHF) 819 million [$776.7 million] mark-to-market loss in respect of its structured credit default swap (CDS) portfolio. The outlook remains stable.”

S&P noted that the combined markdown “brings the group’s aggregate write-down to about CHF2 billion [$1.897 billion] and represents a material increase in the group’s mark-to-market loss.”

Despite that, S&P said it has “not taken negative ratings action because the loss continues to be manageable in the context of both the group’s earnings and its capital position. Despite the write-down, the group reported a net profit after tax for the first quarter of CHF624 million [$591.6 million], albeit at a disappointing return on equity of 8.5 percent. We expect to see further earnings volatility related to fair-value adjustments for the group’s structured CDS portfolio.”

S&P also indicated that it has “reviewed its assessment of Swiss Re’s enterprise risk management (ERM) in light of the circumstances that gave rise to the losses on the structured CDS portfolio. While events have had a negative impact on certain aspects of our assessment, including our appraisal of the group’s risk culture, we consider that the shortcomings exposed are not pervasive enough to cause us to lower our strong overall ERM assessment.”

Source: Standard & Poor’s –

Was this article valuable?

Here are more articles you may enjoy.