S&P Assigns ‘A-‘ Rating to Denmark’s Codan

February 22, 2005

Standard & Poor’s Ratings Services announced that it has assigned its “A-” long-term counterparty credit and insurer financial strength ratings to Denmark’s non-life insurer Codan Forsikrings A/S (Codan Forsikrings) with a stable outlook.

“The ratings on Codan Forsikrings reflect its position within the Codan A/S group,” stated S&P credit analyst Mark Button. “The ratings are based on Codan’s strong competitive position in Denmark and Sweden, its robust capital adequacy, and the significant improvement in operating results stemming in part from the advances in risk and operational management. These factors are offset by the group’s exposure to reserve volatility and a concentrated business profile.”

S&P noted: “The Codan A/S group (Codan) is the third-largest non-life insurer in the Nordic region, writing about Danish krone 15 billion (2 billion euros) [$2.61 billion] of non-life gross premiums. Its 71.7 percent majority shareholder is Royal & Sun Alliance Insurance Group PLC.”

S&P indicated that the stable outlook reflects its “expectation that Codan will maintain its underwriting discipline as rates peak and retain sufficient proceeds from the sale of its Danish life business to support its growth ambitions and a strong level of capital adequacy.”

The rating agency said it “expects Codan to take further costs out of the business, and to post a combined ratio of 96 to 98 percent in 2005, equating to an ROR of 5 to 7 percent. Top-line growth is expected to be modest at less than 3 percent in 2005, although net premiums written are likely to rise by 5 to 8 percent as the group’s quota-share reinsurance treaties are unwound.”

S&P also said it “expects Codan to increase its focus on cross selling and dynamic pricing in order to maintain business momentum and its market position in Denmark and Sweden, while broadening its Nordic franchise.”

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