S&P Reports Stable Outlook for U.S. Reinsurers

December 9, 2004

Standard & Poor’s Ratings Services has published an article titled “U.S. Reinsurance Year-End 2004 Outlook: Ratings Stability in 2005, An Atoll in Stormy Seas.”

The article reviews the U.S. reinsurance industry and explains S&P’s revised outlook from negative to stable due to recent improved market conditions in the U.S. sector.

“Despite moderate premium rate declines in both property and casualty lines in recent months, profitability margins in most lines of business are expected to remain reasonable in 2005, while the pace and magnitude of reserve additions is expected to slow substantially,” explained S&P credit analyst Laline Carvalho. “Thus, barring any large catastrophes, reinsurers are expected to report moderately improved operating performance in 2005.”

Despite the improved outlook, S&P said it still has “long-term concerns about the industry’s ability to sustain this positive trend. U.S. reinsurers are still looked upon as a drag on the global market, with many of the companies’ non-U.S. parents providing financial support to help keep their American subsidiaries solvent.”

“The stable outlook signifies that we expect fewer downgrades relative to upgrades in the U.S. market in 2005,” Ms. Carvalho noted. In fact, we’ve already seen a trend in stabilization. The stabilizing trend, relative to prior years, is tied to declining reserve additions, which peaked in 2002 as well as better pricing conditions.”

The report is available to subscribers of RatingsDirect, Standard Poor’s Web-based credit research and analysis system, at: www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-9823 or send an e-mail to: research_request@standardandpoors.com. Ratings information can also be found on Standard & Poor’s public Web site at:
www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search.

S&P noted that all of its research information “is accessible for 24 hours after publication on the public Web site.”

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