S&P Raises Fondaria-SAI Ratings

Standard & Poor’s Ratings Services has raised its long-term counterparty credit and insurer financial strength ratings on Italian composite insurance group Fondiaria-SAI SpA and its core subsidiary, Milano Assicurazioni SpA, to “BBB+” from “BBB.” The outlook on the two companies is positive.

“The upgrade takes into account the group’s far more cautious and reliable approach to M&A, continuous strengthening of its capital base, and steadily improving enterprise risk management,” stated S&P credit analyst Paola Del Curatolo.

The ratings are further supported by the “group’s strong competitive position and operating performance,” S&P continued. However, the rating agency indicated that these strengths are “partially offset by the concentration of premiums and earnings in Italy, with still-high exposure to motor business and continued, high concentration of the equity portfolio in a few strategic lines.”

S&P also noted that Fondiaria-SAI is No. 2 in the Italian P/C sector with €10 billion ($13.6 billion) gross premiums written as of Dec. 31, 2006.

“The positive outlook reflects Fondiaria-SAI’s present and forecast strengthened competitive position in life business, resulting from the 10-year exclusive distribution agreement with Banco Popolare di Verona e Novara and merger partner Banca Popolare Italiana to distribute the group’s life products, and the ensuing lower concentration in P/C insurance,” Del Curatolo explained.

S&P indicated that a ratings upgrade is possible “if Fondiaria-SAI increases its life business, consequently lowering concentration in P/C insurance and boosting business and earnings diversification; maintains capitalization in line with the ratings; and decreases the equity portfolio’s concentration in a few strategic lines.

“The outlook could be revised to stable, however, if the group reduces its capitalization more than slightly.”

Topics Property Casualty