S&P Affirms Volkswagen Insurance Co. ‘A’ Ratings

October 15, 2003

Standard & Poor’s Ratings Services announced that it has affirmed its ‘A’ long-term counterparty credit and insurer financial strength ratings on Dublin-based Volkswagen Insurance Co. Ltd. (VICO), with a “stable” outlook, following a review. The bulletin noted that the company is a wholly owned captive subsidiary of Germany’s Volkswagen AG.

“The ratings on VICO are significantly influenced by the ratings on VICO’s ultimate parent, VW,” stated S&P credit analyst Paul Oates. “On a stand-alone basis, VICO has strong capitalization, very strong operating performance, a conservative underwriting strategy, and a good business position. These positive factors are partly offset by VICO’s small absolute size, which adversely affects its stand-alone characteristics.”

S&P explained that “VICO is regarded as an integral part of the Volkswagen group’s risk management strategy. It is the only captive insurer of the group, and solely writes business emanating from the group. VW has maintained a captive strategy since 1991, and is committed to VICO in order to minimize the risk transfer costs of the Volkswagen group and to increase emphasis on risk management and loss prevention within the group.”

S&P credit analyst Fahad Changazi noted, “The stable outlook reflects Standard & Poor’s expectation that VICO will continue to act as the captive insurer of the Volkswagen group. Consequently, the group will remain a significant influence on the ratings on VICO.”

The bulletin also stressed that “VW is committed to keeping VICO capitalized at a level that will cover the total exposure from maximum single net loss retentions on all programs.” S&P also expects VICO “to remain profitable at the underwriting level, barring any catastrophic losses,” and does “not expect any significant change in the level of third-party business written by VICO.”

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