S&P Issues Report on European Insurance Sector

May 20, 2003

Standard & Poor’s Ratings Services has issued a report based on its analysis of 34 “debt-issuing insurers,” which concludes that “despite signs of greater stability in the European insurance sector, credit quality remains pressured and rating downgrades are expected to continue.”

The report notes that “throughout all sectors of the European insurance market, financial flexibility (the ability to source new capital and liquidity relative to requirements) and capital adequacy remain consistent issues adversely affecting credit quality.”

S1P credit analyst Rob Jones pointed out that “One-third of the insurers included in the report have been downgraded since Dec. 12, 2002, reflecting the cumulative negative factors that have built up within the insurance sector over the past few years. The outlook on close to 40% of insurers included in the report is now stable, up from 12% in December 2002. Nevertheless, 50% of issuers remain on negative outlook, indicating an expectation that further downgrades may occur.”

The report also noted that “weaker-than-expected earnings are adding to rating pressures, reflecting poor non-life underwriting results in many markets, and realized and unrealized investment losses across all market areas.” Jones indicated that “with weak earnings and depressed capital adequacy and financial flexibility, the quality of management, strength of business franchise quality, and prospective earnings have taken on increasing significance for credit quality.”

S&P said that the study, “Industry Report Card: European Insurance,” was published on May 19, 2003, and is available to subscribers of RatingsDirect, Standard & Poor’s Web-based credit analysis system, at: www.ratingsdirect.com.

It also said a copy of the report could be obtained by contacting one of Standard & Poor’s Ratings Desks as follows: London (44) 20-7847-7400; Paris (33) 1-4420-6705; Frankfurt (49) 69-33-999-223; or Stockholm (46) 8-440-5916.

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