SCOR, Swiss Re and Munich Re Win Fitch Ratings Upgrades

Fitch issued ratings upgrades for SCOR, Swiss Re and Munich Re and affirmed the ranking of a fourth reinsurer: Hannover Re.

Each reinsurer received scrutiny because of their scale, diversity, and ability to grow and attract top-notch global business in what has been a stagnant market. Here’s a breakdown of Fitch’s latest moves and the reasoning behind them:

• SCOR’s insurer financial strength rating is now “AA- stable outlook,” up from “A+ positive outlook.” Additionally, Fitch affirmed the long-term issuer default rating at “A+.” The upgrade comes in light of “the development of SCOR’s reinsurance franchise” into one with greater scale and diversity, through both organic growth and acquisitions, Fitch said. SCOR’s robust level of capitalization and “prudent reserving philosophy” has also been deemed a plus.

• Munich Re’s insurer financial strength rating, formerly “AA-,” has been upgraded to “AA” with a stable outlook. As well, its long-term issuer default rating has been affirmed at “AA.”

Fitch credits two things for its change involving Munich. One element that helped is the “realignment exercise for reinsurers” that followed the publication of Fitch’s revised notching guidelines. Fitch also noted that the upgrade stems from “the strength of Munich Re’s franchise and financial profile within the global reinsurance sector,” including strong P/C reinsurance results and robust capitalization.

“Fitch regards Munich Re’s reinsurance operation as one of a very select group that has the scale, diversity and financial strength to attract the highest-quality business being placed into the global reinsurance market,” the ratings entity noted in its announcement.

• Swiss Re’s insurer financial strength rating jumped to “AA-” from “A+.” Its long-term issuer default rating is also affirmed at “A+,” and Fitch assessed a stable outlook for the reinsurer. Swiss Re’s improved finances, significant position in the global reinsurance sector and strong capitalization helped drive the better rating, Fitch said. As with Munich Re, Fitch also assesses Swiss Re as being part of a “select group” with the size, diverse product line and financial strength that enable them to attract the cream of the crop in terms of global reinsurance business. That’s important, Fitch said, in giving companies a buffer to ongoing price softening in the sector.

Meanwhile, Fitch reaffirmed the insurer financial strength ratings of “AA-” for Hannover Re and its subsidiary. Alongside that, however, it has downgraded the issuer default rating to “A+” from “AA-” But the outlooks on Hannover Re’s ratings are stable. Fitch said the IDR changes (as well as a downgrade on Hannover Re’s subordinated debt to “A-” from “A”) are a response, in part, to Fitch’s updated notching criteria for the insurance sector, which was published on July 14.

Fitch said that Hannover Re’s IFS ratings reflect its strong finances, robust risk-adjusted capitalization and reliable earnings from its core non-life reinsurance segment.

Fitch said it now positions all IFS ratings one notch above the operating company IDR when solvency regulation is considered to be effective.

Source: Fitch Ratings