Swiss Re obtains USD 705 million of extreme mortality risk protection through its Vita Capital programme
16 January 2007, Zurich
Swiss Re has transferred USD 705 million (denominated in USD and Euros) of extreme mortality risk to the capital markets through its Vita Capital securitisation programme. Swiss Re experienced strong interest in this, its third mortality catastrophe bond, which has been issued privately to institutional investors. Part of the issuance will be used to replace cover provided by Swiss Re's first Vita issuance, which expired at the end of 2006, with the balance providing additional protection against extreme mortality risks.
Swiss Re's Chief Executive Officer, Jacques Aigrain, comments: "This securitisation enables Swiss Re to manage peak mortality exposures in a sustainable and capital-efficient manner, and is another example of how Swiss Re is addressing its strategic objective of reducing earnings volatility."
Swiss Re has entered into a transaction with Vita Capital III Ltd to receive up to USD 705 million of payments in the event of severe population mortality in the United States, United Kingdom, Germany, Japan and Canada. The structure of the risk coverage is based on a combined mortality index, which applies predetermined weights to the annual general population mortality in these countries. As the protection buyer under the transaction, Swiss Re receives payments from Vita Capital III if, during any two-year measurement period within the risk coverage period, the combined mortality index exceeds predefined percentages of the base year's mortality level. The trigger levels are 125% for Class A and 120% for Class B.
Class A and Class B were offered with a scheduled maturity of either four or five years. Structured and underwritten by Swiss Re Capital Markets, Vita Capital III is a shelf-offering programme allowing Swiss Re to issue up to USD 2 billion of securities in USD, EUR or other major currency.
Notes to editors
This is not an offer to sell or the solicitation of an offer to buy any securities. The securities sold by Vita Capital III have not been registered under the US Securities Act of 1933, the Investment Company Act of 1940 or any state or foreign securities laws and, accordingly, may be offered or sold, or resold, only in transactions exempt from registration to qualified buyers that are residents of, purchasing in, and will hold the securities in, permitted US jurisdictions or permitted non-US jurisdictions.
Swiss Re is the world's leading and most diversified global reinsurer. The company operates through offices in over 30 countries. Founded in Zurich, Switzerland, in 1863, Swiss Re offers financial services products that enable risk-taking essential to enterprise and progress. The company's traditional reinsurance products and related services for property and casualty, as well as the life and health business are complemented by insurance-based corporate finance solutions and supplementary services for comprehensive risk management. Swiss Re is rated "AA-" by Standard, Poor's, "Aa2" by Moody's and "A+" by A.M. Best.
Cautionary note on forward-looking statements
Certain statements contained herein are forward-looking. These statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to a historical fact or current fact. Forward-looking statements typically are identified by words or phrases such as "anticipate", "assume", "believe", "continue", "estimate", "expect", "foresee", "intend", "may increase" and "may fluctuate" and similar expressions or by future or conditional verbs such as "will", "should", "would" and "could". These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause Swiss Re's actual results, performance, achievements or prospects to be materially different from any future results, performance, achievements or prospects expressed or implied by such statements. Such factors include, among others:
- the impact of future investments, acquisitions or dispositions, and any delays, unexpected costs or other issues experienced in connection with any such transaction, including the ability to efficiently and effectively integrate the GE Insurance Solutions operations into our own;
- cyclicality of the reinsurance industry;
- changes in general economic conditions, particularly in our core markets;
- uncertainties in estimating reserves;
- the performance of financial markets;
- expected changes in our investment results as a result of the changed composition of our investment assets or changes in our investment policy;
- the frequency, severity and development of insured claim events;
- acts of terrorism and acts of war;
- mortality and morbidity experience;
- policy renewal and lapse rates;
- changes in rating agency policies or practices;
- the lowering or withdrawal of one or more of the financial strength or credit ratings of one or more of our subsidiaries;
- changes in levels of interest rates;
- political risks in the countries in which we operate or in which we insure risks;
- extraordinary events affecting our clients, such as bankruptcies and liquidations;
- risks associated with implementing our business strategies;
- changes in currency exchange rates;
- changes in laws and regulations, including changes in accounting standards and taxation requirements; and
- changes in competitive pressures.
These factors are not exhaustive. We operate in a continually changing environment and new risks emerge continually. Readers are cautioned not to place undue reliance on forward-looking statements. We undertake no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.
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