S&P Raises Fondaria-SAI Ratings

July 5, 2007

Standard & Poor’s Ratings Services has raised its long-term counterparty credit and insurer financial strength ratings on Italian composite insurance group Fondiaria-SAI SpA and its core subsidiary, Milano Assicurazioni SpA, to “BBB+” from “BBB.” The outlook on the two companies is positive.

“The upgrade takes into account the group’s far more cautious and reliable approach to M&A, continuous strengthening of its capital base, and steadily improving enterprise risk management,” stated S&P credit analyst Paola Del Curatolo.

The ratings are further supported by the “group’s strong competitive position and operating performance,” S&P continued. However, the rating agency indicated that these strengths are “partially offset by the concentration of premiums and earnings in Italy, with still-high exposure to motor business and continued, high concentration of the equity portfolio in a few strategic lines.”

S&P also noted that Fondiaria-SAI is No. 2 in the Italian P/C sector with €10 billion ($13.6 billion) gross premiums written as of Dec. 31, 2006.

“The positive outlook reflects Fondiaria-SAI’s present and forecast strengthened competitive position in life business, resulting from the 10-year exclusive distribution agreement with Banco Popolare di Verona e Novara and merger partner Banca Popolare Italiana to distribute the group’s life products, and the ensuing lower concentration in P/C insurance,” Del Curatolo explained.

S&P indicated that a ratings upgrade is possible “if Fondiaria-SAI increases its life business, consequently lowering concentration in P/C insurance and boosting business and earnings diversification; maintains capitalization in line with the ratings; and decreases the equity portfolio’s concentration in a few strategic lines.

“The outlook could be revised to stable, however, if the group reduces its capitalization more than slightly.”

Was this article valuable?

Here are more articles you may enjoy.