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Standard & Poor’s announced that it has affirmed its double-‘A’ insurer financial strength and counterparty credit ratings on Assicurazioni Generali SpA, the parent and main property-casualty operating company of Italy’s composite insurance group Generali with a “stable” outlook.
“The ratings on the Generali group are based on its extremely strong business position in personal lines insurance in continental Europe and its very strong and resilient capital base. Offsetting these strengths is the group’s modest historical earnings profile, which is, however, expected to improve gradually,” said S&P’s report..
S&P cited Generali’s gross written premiums of € 45.6 billion ($42.9 billion) in 2001, 59 percent from its market leading position in Italy, and its “enviable number two position in Germany” as being positive factors.
“Generali is therefore well positioned to benefit from the recent partial introduction of private pension plans in these two countries,” stated Yann Le Pallec, a director in Standard & Poor’s Paris office, “despite significantly smaller asset-management capabilities than its peers,” with managed assets of approximately € $235 billion ($250 billion.”
S&P called the company’s capital base “strong and resilient” in excess of 160% according to S&P’s risk-based capital-adequacy model. It also “benefits from relatively lower capital requirements than direct peers thanks to its more retail-oriented risk profile.”
“Generali’s earnings profile remains a relative weakness for the ratings and is expected to improve only gradually over the coming years,” Le Pallec indicated.
“Underlying operating performance proved lackluster, with ROA of 51 basis points (bp) in life and ROR of 1.6% in non-life in 2001, although an improvement on the modest 33bp ROA and weak negative 4.2% ROR in 2000. A full rationalization project, whereby back-offices — mainly claims settlement — will be merged where appropriate, is expected to bring another EUR168 million in cost savings in 2002, in addition to EUR175 million in 2001. Top-line growth is expected to remain modest in 2002 at 5% across the board,” said the announcement.