S&P Places ZSF (Australia) on CreditWatch-Negative

February 18, 2005

In a separate bulletin Standard & Poor’s Ratings Services announced that it has placed its ‘A’ counterparty credit and insurer financial strength ratings on Zurich Australian Insurance Ltd. and Zurich Australia Ltd. on CreditWatch with negative implications.

S&P took similar actions on its ratings for Swiss-based Zurich Financial Services and related entities following the Group’s earnings report (see related article).

“The CreditWatch placement follows ZFS’ announcement that prior-year reserves for its North American corporate business will have to be increased by an additional US$1.6 billion in the fourth quarter of 2004 (US$2.6 billion for full-year 2004), mainly to cover workers’ compensation and liability lines in the U.S.,” said S&P.

It noted that most of the additional reserves will be taken at the Zurich U.S. Intercompany Pool (ZUS) level, and explained that the “CreditWatch placement reflects mounting concerns about the group’s continued reserve strengthening for past accident years, in excess of Standard & Poor’s expectations.”

S&P reiterated its increasing concerns “about the resulting impact on ZUS’ capital adequacy and earnings.”

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