Best Downgrades Winterthur Group Ratings

March 21, 2003

A.M. Best Co. has downgraded the financial strength ratings of Credit Suisse’s Winterthur Swiss Insurance Company and its core subsidiary, Winterthur Life Insurance Company, collectively known as Winterthur Group, to A (Excellent) from A+ (Superior).

Best also said it had “placed the ratings under review with negative implications while it continues to discuss with Winterthur management issues related to the capital requirements supporting the current business plan.”

The ratings changes do not involve Credit Suisse directly, but “reflect the significant deterioration in consolidated risk-adjusted capitalisation,” which was greater than Best had anticipated,and “the fall in earnings in 2002 and the challenges posed by the current volatile financial markets.”

In 2002 Winterthur’s capital base continued to deteriorate despite an injection of SwF 3.7 billion ($2.65 billion) of eligible solvency capital from Credit Suisse. Best said it expects the capital base to grow in 2003 and 2004, and also expects a “Prospectively improving operating performance.”

The rating agency noted that “After a substantial loss in 2002, primarily resulting from lower investment income due to adverse equity market developments, Winterthur continues to focus on improving the underlying profitability of its insurance businesses through the implementation of substantial premium rate increases, selective underwriting and expense reduction. The 2002 consolidated combined ratio and the underlying expense ratio in the life businesses have moderately improved, and further synergies and efficiencies should be generated through the merger of the property casualty and life operations in all markets except Switzerland and the United Kingdom.”

Best said it “will continue to closely monitor developments with Winterthur as the company’s revised strategy unfolds, specifically with regard to the forecast improvement in operating performance and the impact that these developments may have on the under review status for the operations,” and “intends to resolve the under review status as soon as possible.”

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