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Moody's affirms If P&C's ratings (A2 IFSR, stable outlook)

Moody's Investors Service today affirmed the Insurance Financial Strength Rating (IFSR) of If P&C Insurance Ltd.

(Publ) ('If P&C'), a leading Nordic Property and Casualty insurer - at A2, together with the capital contribution securities ratings of the company at Baa2(hyb). In the same rating action Moody's affirmed the senior debt rating of Sampo Plc at Baa2. The stable outlook on all ratings was also affirmed (see below for full list of affected ratings).


Commenting on the affirmation of If P&C's ratings, Moody's highlighted the continued strong underwriting results for 2011, with a reported combined ratio of 92.0% (2010: 92.8%), leading to a post-tax profit of MSEK 4,186m (2010: MSEK 4,985). Furthermore, Moody's notes If P&C's leading pan-Nordic franchise, with an overall market share of around 21% and the relatively high barriers to entry into the Nordic insurance market, together with generally low levels of asset risk (excluding If P&C's holdings of not-rated fixed income securities, which as at YE 2011 amounted to nearly SEK 10bn) and consistently low levels of financial leverage.

The rating also reflects the fact that whilst If P&C is well diversified within the Nordic region, it lacks the broader geographic diversification of larger European groups. Furthermore, whilst If P&C has delivered consistent reserve releases in recent years, it remains exposed to longer tail lines of business such as motor liability and workers' compensation and has consistently upstreamed significant levels of capital to its Parent, Sampo Plc.

Regarding the affirmation of Sampo's ratings, this reflects the affirmation of If P&C's ratings and Moody's normal notching for holding company instruments from those of the insurance operating company. Whilst If P&C remains the largest single insurance operation of the Sampo group, Moody's notes that Sampo Plc also owns Mandatum Life, a Finnish life insurer. Notwithstanding recent improvements in Mandatum's liability profile and its strong current regulatory solvency coverage, Moody's notes that spread deficiency risk remains within this portfolio as a consequence of the meaningful amount of Group and Individual pension reserves on its balance sheet, where annual guarantees are as high as 4.5%. Sampo Plc also owns around 21% of leading pan-Nordic bank Nordea (Aa3/C/a3), providing the Sampo Group significant dividend income streams, but also exposing Sampo to the banking sector's challenges.

Commenting on what could lead to potential positive rating pressure in the future at If P&C (and by association the ratings of Sampo Plc), Moody's noted these would include maintenance of the combined ratio below 95% together with a reported solvency ratio consistently above 70% and gross underwriting leverage below 5x. Conversely Moody's noted that negative rating pressure could occur to the extent that financial leverage at If P&C exceeded 35%, the cross-cycle combined ratio exceeded 100% or the reported solvency ratio falling below 60%.

Based in Stockholm, Sweden, If P&C (owned by Sampo plc) wrote gross written premiums of MSEK 39,855 in 2011 (2010: MSEK 39,991) and reported a 2011 post-tax profit of MSEK 4,186 (2010: MSEK 4,985). Based in Helsinki, Finland, the Sampo Group reported a post-tax profit of Eur 1,038m (2010: Eur 1,104m) and shareholders' equity of Eur 8,920m (2010: Eur 8,886m).

The following ratings were affirmed, all with a stable outlook:

  • If P&C Insurance Ltd (Publ) insurance financial strength rating: A2
  • If P&C Insurance Ltd (Publ) capital contribution securities: Baa2(hyb)
  • If P&C Insurance Company Ltd insurance financial strength rating: A2
  • Sampo Plc issuer rating: Baa2
  • Sampo Plc senior unsecured: Baa2
  • Sampo Plc EMTN senior unsecured: (P) Baa2
  • Sampo Plc EMTN short term senior unsecured: (P) P-2

Moody's most recent rating action on If P&C and Sampo Plc was on 12 February 2009, when the rating of If P&C was affirmed and Sampo was downgraded, both with a stable outlook.


The principal methodologies used in this rating were Moody's Global Rating Methodology for Property and Casualty Insurers published in May 2010 and Moody's Guidelines for Rating Insurance Hybrid Securities and Subordinated Debt published in January 2010.