Ratings: AXA Seguros, Tryggingamidstödin, Thai Insurers, Swedish Club

April 17, 2009

Standard & Poor’s Ratings Services has affirmed its ‘BBB+’ global scale long-term counterparty credit and financial strength ratings on AXA Seguros S.A. de C.V. (AXA Seguros; formerly known as Seguros ING S.A. de C.V.). S&P also affirmed its ‘mxAAA’ national scale (CaVal) financial strength and counterparty credit ratings on the company. The outlook is stable. “The ratings reflect AXA Seguros’ strong market position in the Mexican insurance market and its good capitalization levels, as well as our view that the firm is a strategically important subsidiary of the AXA Group,” said credit analyst Alfonso Novelo. “These positive factors are partially offset by the weak operating performance the insurer has demonstrated over the past three years.” S&P also noted that “AXA Seguros is the third-largest insurer in Mexico, with about 10 percent of the sector’s written premiums. It has the largest share of the property/casualty line and the sixth-largest share of the life insurance market: both product lines fit within AXA Group’s business strategy. The company’s capital adequacy has remained at good levels since 2005, according to our risk based capital model, although it has been under pressure from negative results during this time (except in 2007, when the company registered a net profit of MXN729).AXA Seguros is still being integrated into AXA Group’s business plans. Improvements in its underwriting practices and IT platform evidence the parent’s support. We expect AXA Group to support its Mexican subsidiary with capital if required.

Standard & Poor’s Ratings Services commented on its CreditWatch placement of Iceland-based insurer Tryggingamidstödin hf. (TM). The ‘BB’ long-term counterparty credit and insurer financial strength ratings remain on CreditWatch with negative implications. The ratings were originally placed on CreditWatch with negative implications on Oct. 7, 2008, following the application by TM’s parent company, Stodir hf. (not rated), for bankruptcy protection. This was initially granted up until October 20, but has since been granted two periods of extension, the most recent of which expired on April 6. S&P said it “considers that uncertainties still remain over TM’s future ownership and financial position. We understand that on April 6, Stodir obtained permission from the Reykjavik courts to reach an agreement with its creditors. We are unable to predict with any certainty how long this process will take, although upon its conclusion we expect to have enough information to enable us to resolve the CreditWatch status and the extent of any possible downgrade. In the case of TM’s subsidiary, Norway-based non-life insurer, NEMI Forsikring ASA, the ‘BB’ long-term counterparty credit and insurer financial strength ratings remain on CreditWatch with developing implications. We understand that regulatory approval for NEMI’s acquisition by Copenhagen-based insurer Alpha Group (not rated) is imminent and we expect to make a further announcement shortly. We will continue to monitor developments closely and take actions as appropriate.”

Standard & Poor’s Ratings Services has revised the outlooks on the counterparty credit and financial strength ratings on three Thailand-based insurers to negative from stable: Bangkok Insurance Public Co. Ltd. (A-/–), Thai Life Insurance Co. Ltd. (A-/–), and Thai Reinsurance Public Co. Ltd. (A-/–). S&P said: “The outlook revisions reflect the negative outlook on the local-currency sovereign credit rating on the Kingdom of Thailand after the rating was lowered to ‘A-/A-2’ from ‘A/A-1’ earlier today (the foreign currency rating on Thailand was affirmed at BBB+/Negative/A-2). The outlook revisions on the three insurers also reflect the deterioration in the Thai political situation. As the companies hold a high proportion of domestic investments within their investment portfolios and their businesses are concentrated in the domestic market, they are not immune from the impact of the sovereign rating change.”

Standard & Poor’s Ratings Services has issued a statement indicating that its ratings and outlook on Gothenburg-based marine mutual insurer Sveriges Angfartygs Assurans Forening (The Swedish Club) “are unaffected by the pretax loss of $27.9 million for 2008 (excluding the unbudgeted supplementary calls for the 2006 and 2007 policy years which equate to about $35 million). The negative result largely stemmed from a $25.7 million loss, mostly unrealized, on investments, reflecting the unprecedented decline in financial markets. Partly in response to this, The Swedish Club levied unbudgeted calls which have enabled it to offset the investment losses, leading to a pretax surplus of $7.2 million in 2008. Following the additional capital and the significant reduction in equity holdings to 12 percent of total investments at year-end 2008 (29 percent in 2007), we expect the club’s prospective capitalization to remain in line with the ratings. However, in our view, the levying of the supplementary calls will weaken The Swedish Club’s ability to make further unbudgeted calls in the next few years.”

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