S&P Affirms `A' Ratings on If; Outlook Developing

    LONDON--Feb. 9, 2001--Standard & Poor's today affirmed its single-'A' long-term counterparty credit and insurer financial strength ratings on If Property & Casualty Insurance Ltd. (publ) (If).
    The affirmation follows If's announcement of its 2000 results and its planned acquisition of the insurance portfolio of Forsakrings AB Volvia (Volvia; not rated), the motor insurer of the Swedish truck manufacturer, Volvo (publ.), AB (Volvo; --/--/A-2). Standard & Poor's believes that the Volvia portfolio will complement If's existing book of business. The affirmation reflects the expectation that over the next few months If will strengthen its capital position to a level consistent with its single-'A' ratings. The outlook remains developing.
    The Volvia book comprises insurance for cars and trucks sold at point of sale through Volvo and Renault franchises. The portfolio's performance record is good, averaging a combined ratio of 106.5% during 1995-2000. If has been coinsuring the Volvia portfolio for several years and therefore already understands its characteristics. The acquisition will boost If's net premium volume by about 7%. Completion of the transaction is subject to regulatory and legal approval, receipt of which is expected by mid-2001.
    The acquisition of Volvia's book (net premium volume of about Swedish krona {SKr} 1.3 billion {$134.6 million} and technical reserves of SKr2.3 billion) for SKr562 million has been mainly financed through a SKr500 million capital injection by If's shareholders on Feb. 8, 2001. Furthermore, If is expected to complete a EUR200 million hybrid capital issue in March 2001.
    These two capital enhancements are very important for If, particularly since the benefit of a greatly improved underwriting performance in 2000 (with a combined ratio of 111%; 120% in 1999) was negated by heavy unrealized losses during the fourth quarter, leading to a retained loss for 2000 of SKr708 million. If's current capital adequacy is inconsistent with its single-'A' ratings and these ratings will most likely be lowered in the unlikely event that the hybrid capital issue (or a similar capital enhancement) is not completed.
    If's ratings are driven by the company's significant business franchises in the Swedish and Norwegian nonlife insurance markets, which result in a strong overall business position. This position is underpinned by strong prospective capitalization and financial flexibility. If's earnings prospects are considered to be good.

    OUTLOOK: DEVELOPING

    The outlook is based on uncertainty regarding the future ownership of If, Standard & Poor's said. ---CreditWire