Moody’s Affirms Winterthur Insurance Ratings

June 16, 2003

Moody’s Investors Service has affirmed its A1 insurance financial strength and A2 senior debt ratings on the Winterthur Insurance Group (A1 insurance financial strength at Winterthur Swiss Insurance Company, A2 debt rating at Winterthur Capital) with negative outlooks on both.

The negative outlook stems from the financial position of Winterthur’s parent, “Credit Suisse Group, and its bank operating subsidiaries as well as the on-going challenges of transferring Winterthur’s business into a lower risk profile and restoring profitability,” said Moody’s.

Moody’s issued the ratings affirmation following the announcment that Winterthur had agreed to sell its UK-based Churchill insurance business to the Royal Bank of Scotland for approximately £1.1 billion ($1.83 billion), (See IJ Website June 11) “The transaction, which is subject to regulatory approval, is expected to be completed in Q3 2003 and represents an important step toward improving Winterthur’s capital position and reducing the Group’s overall risk profile,” said the bulletin.

Moody’s indicated that Churchill “had historically been a relatively significant part of the Winterthur Group’s non-life earnings, and that the sale of this business would therefore reduce the Group’s future earnings capacity.” It also commented: “More positively, the substantial gain realised as part of the transaction is expected to remain within Winterthur and to significantly strengthen the Group’s capitalisation position.”

In terms of capital requirements, Moody’s noted that “Churchill had recently shown strong growth rates, and that the removal of this growth funding requirement would mitigate the Group’s capital needs in future.”

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