A.M. Best Affirms Ratings of Assicurazioni Generali S.p.A.

July 22, 2005

A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) and the issuer credit rating of “aa-” of Assicurazioni Generali S.p.A. (Generali) (Italy). At the same time, A.M. Best has affirmed the ratings of debt instruments issued or guaranteed by Generali. (See list below.) The outlook for all ratings remains stable.
The rating actions reflect Generali’s strengthening business profile, excellent capitalisation and improving operating performance. An offsetting factor is the mismatching of the life liabilities with their backing assets leading to potential volatility.

Strong business profile–A.M. Best believes that Generali’s premium growth in both life and non-life business is likely to slow down in 2005, following above-market average growth experienced in 2004. Consolidated premiums are likely to grow by approximately 3%, driven by stable demand for life products. Non-life premium growth will be reduced to less than 2% (6% in 2004) mainly due to rate softening in its more mature markets. The demand for life business in the German and French markets is likely to weaken, while the conditions in the Italian market remain uncertain prior to the restructure of the pensions system. A.M. Best expects consolidated life premiums to grow by approximately 4% in 2005 (down from the exceptional 17.5% of 2004), assisted by a one-off agreement.

Excellent and improving operating performance–A.M. Best expects operating profits for 2005 to improve by approximately 15% over 2004 due to improving business margins and the continuing reduction of the expense ratio. The non-life combined ratio is expected to improve further and fall below 100% (100.9% in 2004) due to the effect of premium increases implemented in 2004 and the continuation of the cost reduction programme. Net investment return is likely to remain stable despite falling interest rates as the company is reviewing its investment strategy and increases its equity allocation.

Excellent capitalisation–Generali’s risk-adjusted capitalisation was strengthened in 2004 due to increased profit generation and a shift towards lower risk products. A.M. Best expects risk-adjusted capitalisation to decrease over the next two years driven by increased dividend payout and the review of the company’s investment strategy. The potential impact of the guarantees on the life reserves continues to be factored into the rating.

The following debt ratings have been affirmed:

Assicurazioni Generali S.p.A.–

“a+” rating on EUR 750 million 4.5% senior debentures, due 2009
“a+” rating on EUR 1,750 million 6.15% senior Eurobonds, due 2010
“a” rating on EUR 750 million 6.9% fixed/floating rate subordinated callable debentures, due 2022

Generali Finance B.V. (guaranteed by Assicurazioni Generali S.p.A.)–

“a+” rating on EUR 1,500 million 4.75% senior unsecured debentures, due 2014
“a+” rating on EUR 500 million 3.875% senior unsecured debt, due 2015
“a” rating on EUR 500 million 5.065% fixed/floating rate subordinated debentures, due 2019

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