S&P Affirms Skandia’s ‘A’ Ratings; Revises Insurance Outlook to Stable

May 5, 2003

Standard & Poor’s Ratings Services said announced that it has affirmed the ‘A’ counterparty credit rating on Sweden’s Skandia Insurance Co. Ltd., and has revised its outlook to stable from negative.

“The rating action follows the announcement on May 1, 2003, that Skandia has completed the sale of American Skandia Inc., the holding company of American Skandia Life Assurance Corp. to Prudential Financial Inc.,” said the announcement.

“The sale of American Skandia addresses a number of the negative rating pressures on Skandia,” stated S&P credit analyst Mark Button. “The improvement in earnings quality owing to lower earnings volatility and reduced dependence on asset-based fees, combined with the improved liquidity and funding position of Skandia supports the outlook revision.”

The rating agency noted that the “$1.15 billion of sale proceeds will enable Skandia to significantly reduce its leverage, enhancing the ability of the group to fund its international growth and respond to the challenging market conditions. The rating on Skandia reflects the group’s strong position in unit-linked life assurance in a number of markets, including the U.K. and Sweden; its positive financial management; and its very strong capitalization. Offsetting factors are the group’s recent earnings performance and its concentrated business profile.”

S&P expects Skandia “to continue managing its expenses in line with sales patterns and to deliver on its cost-cutting program.” It also anticipates continued strong capital adequacy, “reflecting a continuation of Skandia’s policy of maintaining a low-risk liability profile, ” and sees the group maintaining its strong market position in the U.K. and Sweden. Growth at the group level is expected to continue “through the continued development of its geographic diversity in Europe and Asia.”

S&P also noted that it “does not expect significant changes in Skandia’s strategy under its acting CEO, but will assess the ratings impact of future changes following the appointment of a new chief executive.”

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