S&P Affirms Winterthur’s ‘A-‘ Rating

Standard & Poor’s Ratings Services announced that it has affirmed its “A-” long-term counterparty and insurer financial strength ratings on Winterthur Swiss Insurance Co. with a stable outlook.

“The ratings on Winterthur Swiss Insurance reflect the financial strength derived from the consolidated Winterthur group (WG),” stated S&P credit analyst Hiltrud Besgen. “The ratings are based on WG’s strong competitive position, strong operating performance, improved capitalization, and sound operational and risk management.”

S&P noted, however that “potential execution risks associated with the strategy to grow the business in foreign markets, such as Central and Eastern Europe (CEE) and Greater China, as well as the regulatory environment in the Swiss group life insurance market,” constitute offsetting factors.

“The stable outlook reflects Standard & Poor’s expectation that WG’s competitive position will remain strong, with Switzerland and Germany representing the core markets,” Besgen continued. “In these countries WG should realize growth rates in both life and non-life business at least in line with the market average.”

S&P also indicated: “In the selected growth markets CEE and Greater China, WG should build up a positive performance track record. Management is expected to maintain its strict underwriting discipline and to implement further efficiency improvements resulting in a fall in the non-life combined ratio below the expected 2005 level of 98 percent and a decrease in the life expense ratio to less than 10 percent, with the core markets, Switzerland and Germany, representing the group’s major profit drivers.

“Net income is expected to exceed SFr1.0 billion [$783 million] and ROE to reach at least the targeted 12 percent in 2006 and 2007. Strong capitalization should be maintained mainly through sound retained earnings. The ratings could benefit from upside potential if WG provides a track record of sustainable performance above these targets over the next two years, with capitalization remaining well in line with the rating category. Conversely, the ratings could come under pressure if WG does not succeed in achieving the defined expectations regarding profitability and capitalization.”