S&P Revises Assicurazioni Generali Outlook to Negative

November 19, 2002

Standard & Poor’s Rating Services announced that, although it was affirming the ‘AA’ insurer financial strength and counterparty credit ratings on Assicurazioni Generali SpA, the parent and main Italian property-casualty company of pan-European insurance group Generali, it has revised its outlook on the company and related entities to negative from stable.

“The change in outlook is the result of Generali’s revised 2002 earnings prospects, announced on Nov. 14, and of limited capital erosion,” stated S&P’s credit analyst Yann Le Pallec. “The previous stable outlook was based on the expectation that in 2002 operating earnings would grow by 10% and risk-adjusted capital adequacy would be maintained in excess of 160%. The equity market crisis, however, had caused Generali group’s capital adequacy to be lowered to the 150%-155% range-still a very strong level-last summer.”

He further noted that the group’s earnings announcement [See IJ Website Nov. 15] “highlighted a significant drop in investment income over third-quarter 2002, as well as the impact of floods and storms in Central Europe and rising reinsurance protection costs.” As a result Generali’s projected 2002 operating earnings “are now expected to barely exceed the 2001 level.”

S&P stressed that in its view the ratings are supported by Generali’s “extremely strong business position in personal lines insurance in continental Europe and its very strong and resilient capital base.”

However, the bulletin indicated that these strengths were offset by the group’s “modest historical earnings profile.” S&P expects 2002 operating earnings to reach at least the same level as 2001 levels and also expects Generali’s capitalization to be maintained in excess of 150%. It warned that “Failure to do so would result in a downgrade to ‘AA-‘. “

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