S&P Raises If P&C Ratings to ‘A’

October 12, 2005

Standard & Poor’s Ratings Services announced that it has raised its long-term counterparty credit and insurer financial strength ratings on Sweden-based If P&C Insurance Ltd. (publ) and Finland-based If P&C Insurance Co. Ltd., the core operating entities of the If P&C Insurance Group, to “A” from “A-.” The rating outlook is stable.

At the same time, S&P said it has “raised its counterparty credit ratings on Finland-based Sampo Bank PLC (Sampo Bank) to ‘A/A-1’ from ‘A-/A-2’,” also with a stable outlook.

“The upgrade of If and Sampo Bank reflects the Sampo group’s continued outperformance of Standard & Poor’s earnings expectations and the group’s significantly reduced financial leverage,” stated S&P credit analyst Andrew Hughes.

S&P also indicated that it’s “confidence in the sustainability of earnings has increased as early evidence has emerged of If’s disciplined approach to cycle management, together with the continued stability of Sampo Bank. The ratings on If reflect the company’s recent track record of strong earnings improvement, significant business franchises in the Nordic region, strong capital adequacy, and confidence in management’s ability to maintain pricing discipline over a full cycle.

“These positive factors are partially offset by the high, although much reduced, leverage at Sampo PLC, and the increasing investment risk profile. If is the largest non-life insurer in the Nordic region, writing gross premiums of Swedish krona 37.7 billion (4.2 billion euros) [$5.03 billion] in 2004.”

S&P said the stable outlook reflects its “expectation that If’s strong earnings will be maintained through the cycle, that capital adequacy will remain strong, and that a robust competitive position will be maintained in the Nordic non-life insurance market.” It also expects If “to deliver a combined ratio below 95 percent in 2005 and below 97 percent in 2006.”

The stable outlook on Sampo Bank reflects S&P’s “expectation of a continued strong earnings performance, with stabilizing capitalization within the banking operations and no significant deterioration in credit quality. The outlook also reflects Standard & Poor’s expectation that Sampo PLC’s consolidated financial leverage will continue to be managed down below 35 percent. Standard & Poor’s currently sees little upside in the ratings over the next two years, although an increase in the risk profile of the Sampo group’s balance sheet would likely expose the ratings on If and Sampo Bank to downside risk.”

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