S&P Affirms ‘A’ Rating on RSA’s Trygg-Hansa, Revises Outlook to Negative

April 5, 2002

Standard & Poor’s affirmed its single-‘A’ counterparty credit and insurer financial strength ratings on Trygg-Hansa Forsakrings AB, Publikt, but announced that it had revised its outlook on the Sweden-based non-life insurer to negative from stable, “following a deterioration in the Trygg-Hansa group’s capital base due to large underwriting and investment losses in 2001.”

S&P noted that its ratings “reflect the company’s strategic importance to Royal & Sun Alliance Insurance Group PLC (R&SA).” They also reflect the company’s “excellent position in the Swedish general insurance market,” which S&P said was enhanced during 2001 by the acquisition of the commercial insurance portfolio of Folksam Mutual General Insurance (rated BBpi/–/–).

Mark Button, an associate director at Standard & Poor’s Insurance Ratings Group indicated that the “outlook revision reflects the decline in Trygg-Hansa’s capitalization to marginal levels, stemming from significant realized and unrealized losses on shares, and a reserve strengthening during the fourth quarter of 2001.” he also stated S&P was concerned over continuing underwriting losses, “particularly from the third-party motor liability line.” The losses have “compounded the reduction in Trygg-Hansa’s capital base, to the extent that the ratings might be lowered.” The rating agency also feels the company is perhaps too concentrated on “Swedish non-life risks.”

S&P concluded that “Trygg-Hansa’s capital adequacy is expected to improve to more than 100% during 2002, which is a key requirement for maintaining the ratings.” It also expects an improved operating performance “driven by strong rate rises, resulting in a combined ratio below 107% in 2002, ” but warned that, “Failure to make clear progress toward these targets is likely to result in the ratings being lowered.”|”sp, affirms, ‘a’, rating, on, rsa’s, trygg-hansa,, revises, outlook, negative

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