Swiss Re becomes a wounded Goliath of Reinurance

Swiss Re is buying GE Insurance, it's weaker competitor, but is in turn being weakened as it's credit rating slips according to Fitch Ratings.

Fitch Ratings has placed Swiss Re on Rating Watch Negative and GE Insurance Solutions (GE Insurance) on Rating Watch Positive.

The rating actions follow the announcement that Swiss Re is planning to acquire GE Insurance from General Electric Company for $6.8bn. Terms of the transaction also call for Swiss Re to assume $1.7bn of GE Insurance's outstanding debt.

Fitch said that its decision to place Swiss Re's ratings on Rating Watch Negative reflects the agency's concerns surrounding the execution risk relating to the integration of this significant acquisition together with GE Insurance Solution's poor record of adverse reserve development and weak earnings.

Partially offsetting these concerns are potential synergies that the combined group may develop, an improvement in Swiss Re's overall diversification and scale as well as additional pretax reserves of approximately $3.4bn being provided by GE Insurance Solutions.

Standard & Poor's Ratings Services has placed its 'AA' long-term counterparty credit and insurer financial strength ratings on Swiss Re and its core operating companies on CreditWatch with negative implications. At the same time, the short-term 'A-1+' counterparty credit rating on Swiss Re was also placed on CreditWatch with negative implications.

And AM Best has placed the financial strength rating (FSR) of A+ (Superior) and the issuer credit rating (ICR) of ?aa? of Swiss Re and its rated subsidiaries under review with negative implications. Concurrently, all debt ratings either issued or guaranteed by Swiss Re have been placed under review with negative implications.