S&P Affirms Generali at ‘AA’; Outlook Negative

July 28, 2003

Standard & Poor’s has affirmed its ‘AA’ financial strength and long-term counterparty credit ratings on Assicurazioni Generali SpA, the parent and main property-casualty company of the pan-European insurance group Generali. The outlook is negative.

At the same time, Standard & Poor’s also affirmed its ‘AA’ financial strength and long-term counterparty credit ratings on group members Aachener und Muenchener Lebensversicherung AG, Aachener und Muenchener Versicherung AG, and Assitalia SpA.

“The ratings on the Generali group reflect its extremely strong business position in personal and small commercial insurance lines in Continental Europe, and its very strong and resilient capital base,” said Standard & Poor’s credit analyst Laura Santori. “Earnings, which historically have been weak for the rating level, are improving, and rose to EUR2.137 billion in 2002, from EUR908 million in 2001.”

Standard & Poor’s expects operating earnings to improve from their 2002 level, with a net improvement on the non-life side through disciplined underwriting, effective claims management, and incisive actions on non-performing businesses (in particular, Assitalia SpA and Generali’s Austrian operations). The combined ratio is expected to decrease to below 105 percent in 2003.

“While the performance of the life business will depend mainly on market conditions, especially in Germany and France, where margins are tight, Standard & Poor’s expects Generali to maintain financial discipline in order to minimize the impact of depressed financial markets and low interest rates,” said Santori.

Generali has announced an expense reduction plan, which is to be rolled out during the next three years and which should also boost the recovery in earnings. Capitalization is expected to remain very strong and to gradually improve through retained earnings. Business growth across the board is not expected to exceed 2 percent in 2003 and should remain mainly organic.

“The continuing strong focus of Generali’s management on improving business fundamentals remains a key driver for the ratings,” added Santori.

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