Fitch Affirms Generali ‘AA’ Rating, Revises Outlook to Negative

December 6, 2002

Fitch Ratings announced that it has affirmed the Insurer Financial Strength rating of ‘AA’ and the Long-term rating of ‘AA-‘ for Assicurazioni Generali SpA, the major operating insurer and holding entity of the Generali Insurance Group.

Fitch also announced, however, that it has changed its outlook on the company’s ratings from “Stable” to “Negative.” The rating agency said it has concerns that “the group’s bottom-line profitability (including unrealized gains) will continue to be constrained by weak investment markets, and that profitability levels commensurate with the group’s current rating may not be achieved over the short to medium-term.”

It added that the “ratings are based on Generali’s strong capitalisation, excellent business position and tangible benefits derived from the group’s ongoing restructuring programme.” Fitch went on to note that “Partially offsetting these positive rating factors is the group’s relatively modest operating performance over recent years.” In other respects its current capitalization remains strong and is “consistent with the current rating level.”

“Generali holds an excellent business position in the European insurance market, where it ranks as the third largest insurance group. It is the leading insurer in Italy and is ranked second in Germany as well as having a notable presence in France, Spain and Switzerland. Generali’s operating scale ensures that the group has a well diversified underwriting portfolio by business class as well as by geography,” said the bulletin.

Fitch went on to note that Generali is in the process of restructuring its operations and will dispose of a number of “non-strategic” investments, which should lower its costs. It’s also been affected by the decline in equity values, which has hit most insurance companies. The “depressed investment markets also resulted in lower fee income on unit-linked business as investor confidence declined,” said Fitch.

It also indicated that, while premium rates in Generali’s P/C activities have generally risen, this has been partially offset by “increasing reinsurance costs and catastrophe losses from the central European floods.”

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