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Swiss Re Finance Luxembourg S.A.'s Proposed Dollar-Denominated Guaranteed Subordinated Notes Rated 'A'
- 27-Aug-2019 04:47 EDT
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LONDON (S&P Global Ratings) Aug. 27, 2019--S&P Global Ratings said today that it had assigned its 'A' long-term issue rating to the proposed dollar-denominated subordinated perpetual fixed-spread callable notes to be issued by Swiss Re Finance Luxembourg S.A. (SRFL; not rated) and guaranteed by Swiss Reinsurance Co. Ltd. (SRZ; AA-/Stable/A-1+). The rating on the notes is subject to our review of the final terms and conditions. The securities will benefit from an unconditional and irrevocable subordinated guarantee from SRZ.
The issue rating on the proposed notes is two notches below our 'AA-' rating on SRZ, reflecting our standard notching for deferrable subordinated debt issues. We rated the proposed debt on the understanding that, when issued, the notes will be subordinated to debt held by senior creditors and that interest will be deferrable.
We expect to classify the notes as having intermediate equity content under our hybrid capital criteria, subject to review of the final terms and conditions. Subject to our tolerance limits, we include such securities in our calculation of total adjusted capital, which forms the basis of our consolidated risk-based capital analysis of insurance and reinsurance companies. The inclusion is subject to the notes being considered eligible for regulatory solvency, and the aggregate amount of included subordinated debt being no more than the total eligible for regulatory solvency.
We understand that the subordinated debt contains interest-deferral provisions that enable SRFL to optionally defer coupons on any interest payment date, unless any of the following events have occurred in the previous six months:
- Swiss Re Ltd., the parent of SRZ, making any dividend payment on its shares;
- SRZ or SRFL making or declaring any payments on their junior or parity securities; or
- Any member of Swiss Re Group repurchasing any Swiss Re Ltd. shares (except in respect of a share-based compensation plan), or junior or parity securities issued by SRFL or SRZ.
