S&P Affirms CGU Group's 'AA' Ratings; Outlook Stable.Business Editors PARIS--(BUSINESS WIRE)--Standard & Poor's May 9, 2000--Standard & Poor's affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. its double-'A' counterparty Counterparty The other participant, including intermediaries, in a swap or contract. credit and financial strength ratings on Abeille Vie, Abeille Assurances, and CGU CGU Conditions Générales d'Utilisation (French) CGU Claremont Graduate University (Claremont, CA) CGU Chang Gung University (Taiwan) CGU Canadian Geophysical Union Courtage, the three main insurance subsidiaries of CGU France. The outlook for all three companies is stable. CGU France is wholly-owned by CGU PLC, the U.K.-based composite insurer, which is in the process of merging with former British competitor Norwich Union Norwich Union is an insurance company in the UK. It is the biggest life-insurer in the UK, and has a strong position in motor insurance. It is part of the Aviva group, itself created by a merger of Norwich Union and CGU plc in 2000. to create CGNU CGNU Crazy Go Nuts University (Homestar Runner) CGNU Commercial Union, General Accident and Norwich Union (insurance group, renamed Aviva) ; CGNU will be a top-five player in Europe. The ratings on Abeille Vie reflect its core status within the CGU group as one of the latter's largest European life businesses. Abeille Assurances' ratings are based on its strong business position and capital base, and its strategic importance to the CGU group as a top-10 property and casualty insurer in France, specializing in personal lines sold through tied agents. CGU Courtage is the group's smaller nonlife company, selling mainly commercial lines through brokers; this market is considered of lower strategic importance to the CGU group following its merger plans. CGU Courtage is also capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. at a lower level than its sister companies. Its ratings have been maintained, however, supported by a reciprocal Bilateral; two-sided; mutual; interchanged. Reciprocal obligations are duties owed by one individual to another and vice versa. A reciprocal contract is one in which the parties enter into mutual agreements. guarantee that it has exchanged with Abeille Assurances. Overall, the CGU group has a very strong and diversified diversified (di·verˑ·s business position, supported by excellent capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. , financial flexibility, and a consistently strong earnings stream. CGU France holds a strong business position in the French insurance market as a top-10 player, although its earnings remain below the parent company's targets. Major rating factors for CGU France and subsidiaries: -- Strong overall business position. CGU France's life and nonlife premiums for 1999 amounted to FFr21 billion (US$2.9 billion) and FFr7.5 billion, respectively, up by 29% and 5% from 1998. Abeille Vie outperformed the life market, with a 22% increase in revenues to FFr15.8 billion, boosted by the very successful AFER product line, which accounted for 56% of the company's revenues in 1999 and 70% of its mathematical reserves. Standard & Poor's views CGU France as well-positioned to compete with both traditional composite insurers and bankassurers, thanks to its multidistribution strategy through tied agents; brokers; a salaried salesforce; and direct-insurance subsidiary Eurofil (not rated), which set up early this year France's first insurance Web site. Cross-selling opportunities should increase between Abeille Assurances and Abeille Vie; this would help Abeille Vie to develop its portfolio alongside the low-margin/high-volume AFER products by enabling it to sell value-added investment-type policies to the upper layer of the market. -- Weakened weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. operating performance. CGU France's net profit declined to FFr532.4 million in 1999, from FFr683.1 million in 1998 (return on equity down to 5% from 6.3%), owing mainly to the impact on Abeille Assurances and CGU Courtage of year-end 1999 windstorms Lothar and Martin in France. Abeille Vie's net profit improved in 1999, however, to FFr487 million from FFr402 million in 1998. Overall, CGU France's realized capital gains remained at the same level as in 1998, at a substantial FFr1.6 billion or so. Excluding AFER products, CGU France operates with a high cost base compared with its peers, and will have to implement cost cuts. -- Strong capitalization. CGU France is well capitalized, and Standard & Poor's expects CGU PLC to maintain CGU France's capitalization at the current level. OUTLOOK: STABLE Standard & Poor's expects Abeille Vie to experience strong premium growth in 2000, thanks to sustained transfers from traditional bank savings schemes, while nonlife premiums should remain stable, or even slightly decrease. If Abeille Assurances succeeds in implementing rate increases, some improvement in profitability can be anticipated. Standard & Poor's believes CGU Courtage will keep to its conservative 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. standards to maintain profitability at a higher level than that of its peers. CGU France's overall capitalization is expected to be maintained at a strong level, Standard & Poor's said.---CreditWire |
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