STABLE CREDIT OUTLOOK FOR NORDIC NON-LIFE INSURERS IN MEDIUM TERM, SAYS MOODY'S
London, January 19, 2000 -- "Most rated Nordic non-life insurers have good franchises, stable and strong market shares and positive cash flows, which support a stable rating outlook" says Moody's Investors Service in a report published today on the Nordic non-life insurance industry. Moody's ratings for most non-life insurers carry a single A rating (Good), which reflect among other things their generally good asset quality, moderate natural catastrophe risk, strong reinsurance programmes, and generally conservative capital structures.
Further, the creation of larger players could strengthen their competitive position regionally over the long term, and Moody's has largely perceived these combinations as favourable.
Integration and operational challenges remain, however. The high number of mergers in recent years must lead to smooth integration and the realization of synergies, which is not going to be easily achieved because expense ratios are already low by industry standards, and hence there is little scope for further cost cutting. Improved results would have to come from the revenue side but again the market is mature and there is little prospect for growth.
To report improved returns under these conditions, some insurers are turning to buying back shares or paying special dividends: a combination of low profitability and reduced capitalization levels could weaken their credit risk ratings prospects.
In addition, there is a concern that some groups' strategic focus is turning away from their traditional area of expertise (non-life insurance) in an attempt to become primarily asset managers and life assurers. These businesses face intense competition and slimming margins, and Moody's does not view some Nordic insurers as strongly positioned particularly in the asset management field, hence the shift may not necessarily strengthen the companies from the credit point of view.
Moody's has an insurance financial strength rating on the following Nordic companies:
Company IFSR  and Outlook
Codan Insurance Company Ltd A1, Stable
Copenhagen Reinsurance Company Ltd A3, Negative
If Property & Casualty Insurance Ltd. A1, Stable
Pohjola Non-Life Insurance Company Ltd.* A1, Stable
Sampo Insurance Company plc A2 , Positive
Sirius International Insurance Corporation A1, Stable
Tryg-Baltica Insurance Company Limited A2, Stable
Trygg-Hansa Insurance Company Limited A2, Stable
 IFSR stands for Insurance Financial Strength Rating
 Rating under review
* Upon completion of regulatory approvals and business transfers to If..., Moody's will withdraw the rating of Pohjola.
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