Best Affirms Generali Deutschland and Subs ‘A+’ Ratings; Outlook Stable

September 6, 2011

A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating (FSR) of ‘A+’ (Superior) and issuer credit ratings (ICR) of ‘aa-‘ of Generali Deutschland Holding AG and its main subsidiaries. The outlook for all of the ratings remains stable.

Best said the “ratings of Generali Deutschland reflect its strong risk-adjusted capitalization, good earnings and strong business position in its domestic market.” It also described the group’s risk-adjusted capitalization as “strong, adding that Best “expects it to remain supportive of the current ratings in the next two to three years factoring in the company’s business plans.”

Best also explained that the “impact of investment losses from Italy and peripheral euro zone countries on the group’s balance sheet to remain limited as the exposure was approximately 10 percent of total invested assets at year-end 2010, and shareholders’ equity had only declined by 2 percent to €3.95 billion [$5.57 billion] for the period from year-end 2010 to half-year 2011.

“The risk-adjusted capitalization is supported by a number of soft capital factors (such as policyholders’ bonuses and value of life in-force business), which are partially offset by a high amount of deferred acquisition costs. Dividends are expected to remain in the range of 30 percent to 40 percent of total earnings, and financial leverage is likely to remain low going forward.

In addition Best it expects Generali Deutschland to post good profits-after-taxes in 2011 between €380 to €420 million [$536 to $592 million] “supported by good life results and a strong and stable non-life underwriting performance.

“At half year 2011, the group performed well with a 28 percent increase in overall profits (up to €230 million [324.3 million]) as a result of a slight improvement in claims development and higher premiums. Generali Deutschland’s profits-after-taxes increased from €341 million [$481 million] in 2009 to €402 million [$567 million] in 2010 supported by an increase in net investment income (up by 27.3 percent to €3.86 billion [$5.443 billion]), an above market underwriting performance (non-life loss ratio of 65.7 percent) and well managed expenses.”

Best added that it “expects Generali Deutschland to continue growing above market average in the next couple of years, and at half year 2011, the group’s total premiums were up almost 1.0 percent due to the ongoing demand for both life and health products. In 2010, total premiums increased by 9.6 percent to €16.28 billion [$22.955 billion] boosted by strong sales in the life and health segments (up by 12.5 percent to EUR 11 billion [$15.51 billion] and by 11.8 percent to €2.2 billion [$3.1 billion], respectively).”

However, Best also pointed out that the “non-life business continued to suffer from intense competition and soft motor rates resulting in a small decrease in premiums (down 1.2 percent to €2.99 billion [$4.216 billion]).

“Generali Deutschland is the second-largest primary insurer in Germany with an excellent business position in retail and commercial insurance. The group benefits from highly diversified brands and distribution channels (including the exclusive partnership with Deutsche Vermögensberatung AG) with a strong advisory capacity, which have enabled above market growth in the last few years.”

Best summarized the ratings affected by its report as follows:

The FSR of A+ (Superior) and ICR of ‘aa-‘ have been affirmed for Generali Deutschland Holding AG and its following subsidiaries:
— AachenMünchener Lebensversicherung AG
— AachenMünchener Versicherung AG
— Generali Lebensversicherung AG
— Generali Versicherung AG
— COSMOS Lebensversicherungs-AG
— COSMOS Versicherung Aktiengesellschaft
— Central Krankenversicherung Aktiengesellschaft

Source: A.M. Best

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