Best Affirms Generali’s ‘A+’ Ratings

A.M. Best Co. has affirmed the financial strength rating of ‘A+’ (Superior) and issuer credit ratings of “aa-” of Italy’s Assicurazioni Generali S.p.A., as well as the debt instruments issued or guaranteed by Generali. The outlook for all ratings remains stable.

Best said, “the ratings reflect Generali’s excellent business profile and strong but declining financial performance and capitalization. Generali’s excellent business position in Continental Europe continues to strengthen with the group reporting increases in premiums on a background of declining markets.”

Best also indicated that it “believes that consolidated premiums are likely to grow by 3 percent-4 percent in 2008. Additionally, life business should grow by 2 percent-3 percent as the challenging conditions and declining premiums in the Italian market are offset by a strong demand in Riester products in Germany and traditional products in France. Non-life premium growth is likely to emanate from Eastern Europe and Italy.”

However, Best noted that it expects Generali’s profitability to decline by 15 to 20 percent in 2008 due to capital losses, with the life segment being the hardest hit. On the other hand “non-life profitability is likely to remain robust,” said Best. “Consolidated non-life profitability is expected to improve slightly from the excellent 95.8 percent combined ratio of 2007, as a result of a reduction in non-profitable business and growth in more profitable emerging markets. Overall expense levels are likely to decline following the company’s programs in order to consolidate back offices and reduce organizational structure.”

Risk-adjusted capitalization is expected to “remain strong, despite the impact of the increased dividend payout, increased volumes of goodwill arising from recent acquisitions and the reduction in revaluation reserves. A.M. Best expects the decline of risk-adjusted capitalization to be short term and the company to take corrective actions by delaying the more aggressive parts of the restructure of its investment portfolio until its capitalization allows it.”

The following debt ratings have been assigned to the €3 billion ($4.4 billion) medium-term note program issued jointly by Assicurazioni Generali S.p.A and Generali Finance B.V.

Assicurazioni Generali S.p.A and Generali Finance B.V.—
— “a+” on all senior notes to be issued under the program
— “a” on all subordinated and hybrid notes to be issued under the
program

The following debt ratings have been affirmed:
Assicurazioni Generali S.p.A.—
— “a+” on EUR 750 million 4.5 percent senior debentures, due 2009
— “a+” on EUR 1,750 million 6.15 percent senior Eurobonds, due 2010
— “a” on EUR 750 million 6.9 percent fixed/floating rate subordinated
callable debentures, due 2022
Generali Finance B.V. (guaranteed by Assicurazioni Generali S.p.A.)—
— “a+” on EUR 1,500 million 4.75 percent senior unsecured debentures, due
2014
— “a+” on EUR 500 million 3.875 percent senior unsecured debt, due 2015
— “a” on EUR 500 million 5.06 percent fixed/floating rate subordinated
debentures, due 2019

Source: A.M. Best – www.ambest.com