S&P Affirms ‘A’ Rating of Winterthur Swiss Insurance

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

S&P explained that Winterthur Swiss is the holding company for the Winterthur Group (WG), and an operating non-life insurer. “WG in turn forms part of Switzerland-based Credit Suisse Group (CSG; A/Stable/A-1), the primary bank operating entities of which are rated ‘A+/Stable/A-1’.”

The ratings announcement comes after CSG’s conclusion of agreements with the Royal Bank of Scotland to sell WG’s U.K. non-life insurance subsidiary, Churchill Insurance Group PLC (See IJ Website June 12), and to sell its Italian non-life and life subsidiaries to Compagnia Assicuratrice Unipol SpA. (See IJ Website June 23) “Upon completion, scheduled for the second half of 2003 and subject to regulatory approvals, both transactions will crystallize significant capital gains at Winterthur Swiss Insurance”, said S&P.

“Standard & Poor’s understands that these gains will be retained within WG, thereby bolstering the group’s prospective capital adequacy position,” indicated S&P credit analyst Marcus Rivaldi. “In contrast, the announced sales are expected to negatively affect WG’s future underwriting performance, partially offset by additional investment returns from sale proceeds. The significant non-life entities concerned are currently some of WG’s best performers and enhance the geographic diversity of earnings. Moreover, margins within the key Swiss employee benefit business are currently tight as a result of the present investment environment, and specific reserve adequacy concerns remain.

“Standard & Poor’s continues to regard WG as strategically important to CSG and, as a result, the ratings on Winterthur Swiss Insurance benefit from this support,” Rivaldi added. “WG management remains committed to reinforcing its capital base by focusing on bottom-line profitability and selling nonstrategic assets. As a result, further group disposals cannot be discounted.

“The outlook reflects the risk that a change in WG’s strategic position within CSG would negatively affect the ratings on Winterthur Swiss Insurance,” he concluded.