S&P: Austrian Insurance Ratings Stable

March 13, 2007

Standard & Poor’s Ratings Services recently published a report entitled “Austrian Insurance Ratings Set To Stay Stable For Next Two Years, Drawing On Sound Credit Fundamentals.” It concludes that “credit fundamentals for Austrian insurers have generally improved in recent years and should remain sound, with the effect that ratings on Austrian insurers are expected to stay largely stable over the next two years.”

“Continuously sound growth rates, boosted by domestic life insurance and expansion into Central and Eastern Europe (CEE), as well as strong operating results, despite intensifying price competition envisaged in some commodity non-life lines, underpin the stable outlooks for most interactively rated insurance companies,” stated S&P credit analyst Ralf Bender.

“The past few years have seen comprehensive restructuring measures with regard to claims management in non-life and health insurance, an easing claims environment, a mostly cautious bonus policy on traditional life products, stringent cost savings programs, sound risk and asset liability management practices, which together have borne fruit for Austrian insurers rated by Standard & Poor’s,” he continued. Capital-market stability and rising interest rates of late further support insurer financial strength ratings.

S&P also indicated that “downward pressure on Austrian insurance ratings is limited, but could arise from significantly heightened competition in the domestic non-life market, driven by primarily growth-oriented players, too aggressive CEE expansion that negatively affects insurers’ capital bases, or an unexpected substantial adverse development in large areas of CEE.

“Upward momentum is very limited at this stage and may emerge only in the long run as presences in CEE add significantly to the growth and earnings diversity of domestic groups, while profitability measures further strengthen and the interest rate environment brightens.”

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