S&P Revises Outlook on Italy’s Generali to Stable; Affirms ‘AA’ Ratings

September 14, 2004

Standard & Poor’s Ratings Services announced that it has revised to stable from negative its outlook on Assicurazioni Generali SpA, the parent and main property-casualty company of the pan-European insurance group Generali, and related entities. S&P also affirmed the Group’s “AA” counterparty credit and insurer financial strength rating.

“The outlook change follows the presentation of the company’s half-year 2004 results, which confirm the improving trend in operating performance established in 2003,” explained S&P credit analyst Laura Santori. “The group is successfully executing its strategy, focusing on the improvement in business fundamentals. The execution risk that drove the negative outlook has now disappeared, and little uncertainty remains with regard to the ability of the group to deliver a strong stream of earnings in normal market conditions, while still maintaining healthy growth.”

Santori said the group’s earnings are expected to continue to improve, particularly in P/C. The combined ratio should remain below the 2004 target of 102 percent, with the continuous efforts to improve underwriting offsetting the expected softening of the cycle. Life earnings should be fuelled by the strong new production, with the volume effect offsetting the slight decrease in margins in Italy that resulted from the higher proportion of less profitable single-premium contracts.

The report indicated that “capitalization is expected to be maintained at the ‘AA’ level; Generali’s solid capital base should be able to withstand the new business strain, thanks to a solid stream of retained earnings. While business growth is expected to remain stable in P&C, life growth should continue at the current very strong level. The momentum of the new marketing campaign should continue in Italy, and growth in Germany for 2004 should be boosted by a surge in sales before the change in tax regime. In the medium term, Generali is expected to fully take advantage of the pension reforms, given its presence and penetration in the main European markets.”

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