S&P Revises Atradius Outlook to Negative; Affirms Ratings

Standard & Poor’s Ratings Services has revised to negative from stable its outlook on Atradius Credit Insurance N.V., Atradius Reinsurance Ltd., Atradius Trade Credit Insurance Inc., and Compañía Española de Seguros y Reaseguros de Crédito y Caución S.A.–the core operating entities of the Netherlands-based Atradius credit insurance group.

S&P concurrently affirmed its ‘A/A-1’ long- and short-term counterparty credit and insurer financial strength ratings on Atradius Credit Insurance N.V. and its ‘A’ long-term counterparty credit and insurer financial strength ratings on the other core entities.

“The outlook revision reflects the marked deterioration in Atradius’ earnings during the third quarter of 2008,” explained credit analyst Charis Adu-Kwapong. “This has had an adverse impact on its capital adequacy, which,” he said, has now fallen below a level consistent with S&P’s expectations. “The deterioration increasingly reflects the difficult global economic conditions during the third quarter of 2008, which have weakened the earnings of credit insurers in general,” he added.

S&P said, however, that the “ratings on the core operating entities of the Atradius group continue to reflect the group’s leading position in the international credit insurance market and strong historic operating performance. The challenging operating environment for credit insurers generally and Atradius’ considerable, although decreasing, reliance on reinsurance act as constraints to the ratings.

“The negative outlook reflects the impact of the challenging operating environment on Atradius’ earnings prospects for the next two years and the consequent increased risk of failing to meet Standard & Poor’s capital expectations over the rating horizon.”

S&P added that the ratings “may be lowered if further adverse trends emerge in the underlying earnings performance, resulting in a net combined ratio for the group of more than 125 percent for 2008 and 115 percent during 2009. In addition, the ratings could be lowered if Atradius fails to rebuild its capital position to levels consistent with the ratings over the next 18 to 24 months.

“We would base a revision of the outlook to stable on evidence that the group has restored its capital position to levels consistent with the ratings, combined with a significant improvement in Atradius’ earnings performance over the next 12 to 18 months.”

Source: Standard & Poor’s – www.standardandpoors.com