OREANDA-NEWS. Fitch Ratings has affirmed Swiss Reinsurance Company Limited's (Swiss Re) Insurer Financial Strength (IFS) rating at 'AA-' and Long-term Issuer Default Rating (IDR) at 'A+'. These actions also apply to the ratings of core operating subsidiaries. The Outlooks are Stable. Fitch has simultaneously affirmed Swiss Re's senior and subordinated notes. A full rating breakdown is available at the end of this commentary.

KEY RATING DRIVERS
The affirmation reflects the strength of Swiss Re's financial profile, dominant position within the global reinsurance sector and very strong risk-adjusted capitalisation. Fitch regards Swiss Re's reinsurance operation as one of a very select group that have the scale, diversity and financial strength to attract the highest quality business being placed into the global reinsurance market. This should provide high resilience to the softening pricing conditions that are being reported across several reinsurance classes.

Fitch expects Swiss Re's property and casualty (P&C) reinsurance business to remain the core earnings generator for the foreseeable future. The company's main business segment has consistently achieved strong results, both on an absolute basis and compared with peers, reflecting a depth of underwriting experience and good diversity by reinsurance class. P&C reinsurance reported a 9M15 combined ratio of 84.8% (9M14: 82.7%), which included a net pre-tax loss estimate of USD235m in respect of the Tianjin explosion in August 2015.

Life and health (L&H) reinsurance performance continues to strengthen, with 9M15 operating margin improving to 10.7% (9M14: 8.8%). Fitch believes that management actions taken to address underperforming business lines within the division should eliminate the drag on the performance of the L&H segment and improve its results. The reinsurer has reiterated its commitment to achieving its 10%-12% return on equity (ROE) target for 2015.

Fitch views capitalisation as very strong. The strength of Swiss Re's capital position is endorsed by confirmation that it would commence a previously announced CHF1bn share buy-back programme on 12 November 2015.

Fitch recognises that the operating environment remains challenging for Swiss Re and the wider (re)insurance industry. Persistently low interest rates and increasingly intense competition, especially in non-life reinsurance, continue to drive price softening across certain major reinsurance classes. The agency expects Swiss Re's diversified business profile and prudent underwriting policy to provide resilience to a protracted period of price softening, should this occur.

RATING SENSITIVITIES
The key rating drivers that could result in an upgrade include: reduced financial leverage under 15% (2014: 24%) and the risk-adjusted capital position increasing to 'extremely strong', as measured by Fitch's Prism Factor-Based Model (FBM), with underwriting performance remaining strong relative to similarly rated peers.

The key rating drivers that could result in a downgrade include: increased financial leverage above 25%; a sustained material drop in the company's risk-adjusted capital position to below 'very strong', as measured by Fitch's Prism FBM; a marked increase in the total financing and commitments ratio above 1.0x (end-2014: 0.6x); or material underperformance relative to similarly rated peers.

FULL LIST OF RATING ACTIONS

Swiss Reinsurance Company Ltd
IFS rating: affirmed at 'AA-'; Outlook Stable
Long-term IDR: affirmed at 'A+'; Outlook Stable
Senior unsecured debt: affirmed at 'A+'

Swiss Re Corporate Solutions Ltd
IFS rating: affirmed at 'AA-'; Outlook Stable
Long-term IDR: affirmed at 'A+'; Outlook Stable
Subordinated debt affirmed at 'A-'

Swiss Re Treasury (US) Corp.
Senior notes affirmed at 'A+'

Aquarius + Investments PLC
Subordinated debt (XS0897406814) affirmed at 'A-'
Contingent write-off note (XS0901578681) affirmed at 'BBB+'

Cloverie PLC
Subordinated debt affirmed at 'A-'

ELM B.V.
Subordinated debt affirmed at 'A-'

Swiss Re Capital I LP
Subordinated debt affirmed at 'A-'.