A.M. Best Affirms Ratings of Lloyd Adriatico S.p.A.OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) and the issuer credit rating of "aa-" of Lloyd Adriatico S.p.A. (Italy). The outlook is stable, which is in line with the outlook of its parent company, Allianz SE (Allianz). The ratings reflect the enhancement Lloyd Adriatico receives from the implicit support of Allianz. Other factors include the company's excellent consolidated risk-adjusted capitalisation and very strong operating performance. An offsetting factor is Lloyd Adriatico's declining business position in the life sector. Excellent consolidated risk-adjusted capitalisation--A.M. Best believes that Lloyd Adriatico's consolidated risk-adjusted capitalisation is likely to remain excellent in 2006 despite substantial dividends paid to the parent company. Lloyd Adriatico has a stable risk profile as it writes mainly private motor insurance and has a very prudent approach to reserving and reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. . Very strong operating performance--Lloyd Adriatico's operating performance is likely to remain very strong with an anticipated after-tax profit of approximately of EUR EUR In currencies, this is the abbreviation for the Euro. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 280 million (USD USD In currencies, this is the abbreviation for the U.S. Dollar. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 370 million), which translates into a return on equity of 25% in 2006. Profits are mainly driven by the continued strong non-life underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. performance in 2006 with an anticipated combined ratio of approximately 75% (compared to 76.9% in 2005), although technical results are benefiting from run-off profits from previous underwriting years. A.M. Best expects that in the absence of further reserve releases and strong competition in the Italian motor market, underwriting results are likely to deteriorate de·te·ri·o·rate v. 1. To grow worse in function or condition. 2. To weaken or disintegrate. in 2007. However, A.M. Best believes that Lloyd Adriatico's unique pricing system Noun 1. pricing system - a system for setting prices on goods or services system - a procedure or process for obtaining an objective; "they had to devise a system that did not depend on cooperation" and effective risk selection are likely to limit the impact of softening premium rates on earnings. In A.M. Best's view, life earnings remain excellent; however, the contribution to overall results is likely to decline due to a significant drop in premium income expected in 2006 and 2007. Declining business position in life--A.M. Best expects a significant decline in life gross premiums written When a non-life insurance company closes a contract to provide insurance against loss, the revenues (premiums) expected to be received over the life of the contract are called gross premiums written. by approximately 25% to EUR 1.5 billion (USD 2 billion) (including unit-linked) in 2006 as a result of the restructuring process that affected the company's bancassurance Bancassurance A French term referring to the selling of insurance through a bank's established distribution channels. Notes: The result is a bank that can offer banking, insurance, lending, and investment products to a customer. partner. In non-life, Lloyd Adriatico has an excellent business profile in the Italian motor market. Despite efforts to diversify into to other lines of business, Lloyd Adriatico's non-life portfolio remains concentrated on motor, where it writes approximately 75% of total non-life premiums. For Best's Ratings Best's rating A rating A.M. Best Co. assigns to insurance companies based on the company's ability to meet its obligations to its policyholders. , an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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