S&P Sees Growth in Spain

February 15, 2006

In a recent report- “Insurance Industry Risk Analysis: Spain (Kingdom of)” – Standard & Poor’s predicted further growth in the Spanish economy and indicated that the “current relatively low insurance penetration will drive significant growth in both property/casualty (P/C) and life insurance sales.”

S&P noted: “A fast-growing industrial base, increasing disposable income, and demographic changes are also boosting the demand for insurance products in the Spanish market. The Spanish insurance industry, both P/C and life, benefits from moderately low economic risk.”

S&P credit analyst Marco Sindaco commented: “As disposable income per capita increases, demand for asset-protection products is also expected to grow; In the medium term, growth in the Spanish P/C and life markets is therefore expected to outstrip growth in the overall economy.”

The rating agency said it “views industry risk in the Spanish P/C insurance market as moderately low. The historical dependence of the P/C sector on motor insurance is lessening.” Sindaco indicated: “The booming housing market has supported growth in property insurance, in particular multirisk, which has been the fastest-growing P/C class of business over the past five years. A more diverse business mix will be an important strategy as rates begin to soften in the already highly competitive motor sector.”

Discussing the Spanish life insurance market, S&P said it views risks as moderate. It also noted: “The Spanish insurance market, the sixth largest in the EU, has seen consolidation in recent years, and is still notable for an almost total lack of material exposure to markets outside of Spain.”

“The insurance market is strongly correlated with the domestic economy, and is also facing competitive pressure from both major mutual insurers and subsidiaries of international groups,” stated S&P credit analyst Peter McClean. “However, the country’s strong economic performance and the competitive environment are expected to provide a platform for further development of health, pension, and P/C products, especially nonmotor,” he added.

The report is available to subscribers of RatingsDirect, S&P’s Web-based credit research and analysis system, at: www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may
purchase a copy of the report by calling (1) 212-438-9823 or sending an e-mail to: research_request@standardandpoors.com. Ratings information can also be found on Standard & Poor’s public Web site at: www.standardandpoors.com.

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