Swiss Re, the world's number 2 reinsurer, has had its much-envied AAA ratings downgraded by Standard & Poor’s.  

S&P lowered the long-term counterparty credit and financial strength ratings of  Swiss Re and its related core subsidiaries including Swiss Re Australia and Swiss Re Life & Health Australia to AA+. It also removed them from CreditWatch where they were placed in August.

 “The main factors behind the downgrade are recent marginal non-life underwriting performance, a decline in Swiss Re's capital adequacy since the end of 2001, and somewhat reduced financial flexibility,” S&P credit analyst Michael Vine said.

He said that although S&P’s expects Swiss Re to achieve very strong operating performance in the next few years and “outperform” the reinsurance industry average, “earnings are not expected to be sustained at a level commensurate with a AAA rating in the longer term”.

“Capital adequacy, although remaining very strong, has fallen from its extremely strong historic levels,” Mr Vine said. “Absolute levels of adjusted capital will not rise materially in 2002, due to the falls in stock markets offsetting the improved non-life profitability and steady contributions from the life reinsurance operations,” he said.

The outlook on Swiss Re and all group entities has been put at “stable”.