S&P Affirms Lloyd Adriatico SpA Ratings

August 4, 2003

Standard & Poor’s Ratings Services said it affirmed its ‘A+’ long-term counterparty credit and insurer financial strength ratings on Italy-based insurer Lloyd Adriatico SpA (LA), following a review. The outlook is negative.

“The ratings reflect the company’s strategic importance to its parent, good business position, strong operating performance, and strong capitalization,” said Standard & Poor’s credit analyst Antonello Aquino. “These factors are offset by LA’s concentration on the Italian motor third-party liability market and its dependence on a single key bancassurance agreement to sell life insurance. This agreement nevertheless guarantees exclusivity until 2009,” added Mr. Aquino.

The negative outlook on LA reflects the negative outlook on the parent, Allianz AG (AA-/Negative/A-1+). The ratings and outlook on LA would likely be affected by any change in the ratings or outlook on the parent.

Non-life business is expected to continue to be the major value driver for the company, but is not expected to improve significantly as the company has already achieved an outstanding combined ratio. Life results will be dependent on capital market behavior, as fee volumes are tightly connected to share price levels. Low interest rates also add pressure on the investment spread from traditional life policies.

Capitalization is expected to remain strong thanks to retained earnings, and no significant capital needs are foreseen in the medium term.

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