S&P Assigns 'A' Ratings to UNIQA Versich; Outlook Neg.Business Editors LONDON--(BUSINESS WIRE)--Standard & Poor's Jan. 10, 2001-- Standard & Poor's today assigned its single-'A' long-term counterparty credit and insurer financial strength ratings to UNIQA Versicherungen AG. The outlook is negative. At the same time, Standard & Poor's withdrew its single-'A' long-term counterparty credit and insurer financial strength ratings on UNIQA Sachversicherung AG. The ratings on UNIQA Versicherungen AG are based on the company's core strategic role within the Vienna-based UNIQA insurance group, its very strong business position in the Austrian insurance market, and the strong capitalization at a group level. Offsetting these factors are UNIQA's lackluster earnings and concerns about the group's ability to achieve a turnaround in its fortunes. UNIQA Versicherungen AG is the holding company and internal reinsurer re·in·sure tr.v. re·in·sured, re·in·sur·ing, re·in·sures To insure again, especially by transferring all or part of the risk in a contract to a new contract with another insurance company. of the UNIQA group. Although the rating only applies to UNIQA Versicherungen AG, it is influenced by the strength of its subsidiaries, UNIQA Personenversicherung AG (life, health, and accident insurance), Raiffeisen Versicherung AG (life and nonlife insurance through co-operative banks The Co-operative Bank is a co-operative bank trading in the United Kingdom with headquarters in Manchester, UK. It is an ethical bank, and refuses to invest in companies involved in the arms trade, genetic engineering, animal testing and use of sweated labour as stated in its ), and UNIQA Sachversicherung AG (nonlife). Major rating factors: -- Core strategic role: UNIQA Versicherungen AG is the holding company of the UNIQA insurance group and is the sole reinsurer for the Austrian operating companies operating company A business that engages in transactions with outsiders. (with the exception of high risks, where facultative facultative /fac·ul·ta·tive/ (fak´ul-ta?tiv) not obligatory; pertaining to the ability to adjust to particular circumstances or to assume a particular role. fac·ul·ta·tive adj. 1. 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. cover is required). -- Strong business position in the Austrian market: Through Raiffeisen-Versicherung and UNIQA Personenversicherung, the group is the largest life and health insurer in Austria. UNIQA is also one of the leading nonlife insurers in Austria. The Austrian market is relatively small, however, and therefore offers limited growth opportunities. UNIQA is addressing this problem by gradually expanding into Eastern Europe Eastern Europe The countries of eastern Europe, especially those that were allied with the USSR in the Warsaw Pact, which was established in 1955 and dissolved in 1991. and selected southern European countries. The group is in the process of acquiring Polonia, a Polish composite insurer. With Polonia's premium income of about Austrian schilling 1 billion ($68 million) in 1999, the UNIQA group will thereby double its share of revenue generated from outside Austria. -- Strong capitalization on a consolidated level: On a consolidated group basis, UNIQA's capitalization is strong, demonstrated by a capital adequacy ratio Capital adequacy ratio (CAR), also called Capital to Risk (Weighted) Assets Ratio (CRAR)[], is a ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss. of 167% at year-end 1999. The holding company's capital level is expected to decline as a result of further acquisitions in Eastern Europe, but is still expected to be strong in future. -- Lackluster earnings: Operating performance has been disappointing, in particular in nonlife insurance. The Austrian market still suffered from extreme competition throughout 2000, although there are signs that the motor market is gradually hardening hardening, in metallurgy, treatment of metals to increase their resistance to penetration. A metal is harder when it has small grains, which result when the metal is cooled rapidly. . In addition, both life and nonlife operations suffer from high expense levels. UNIQA's nonlife combined ratio reached 113% in 1999 (109.5% in 1998), a result of deteriorating loss experience and increased expenses. Overall performance is expected to have remained unsatisfactory in 2000, despite anticipated cost savings due to the restructuring of the group. OUTLOOK: NEGATIVE Standard & Poor's is concerned about UNIQA's operating performance, which is not in line with the current rating level, and there is currently little prospect of significant improvement. UNIQA's management is preoccupied with its efforts to expand outside Austria and to integrate newly acquired subsidiaries. Therefore, a downgrade Downgrade A negative change in the rating of a security. Notes: For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. would have to be considered if no significant progress is made to achieve improved earnings within the next two years, Standard & Poor's said. -- CreditWire Copyright 2001, Standard & Poor's Ratings Services Ratings Service A company, such as Moody's or Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends. |
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