Untitled

Industry Report Card:
Global Multiline Insurers' Robust Market Positions And Improving Capital Translate Into Stable Ratings
Primary Credit Analysts: Tracy Dolin, New York (1) 212-438-1325; tracy.dolin@standardandpoors.com Volker Kudszus, Frankfurt (49) 69-33-999-192; volker.kudszus@standardandpoors.com Secondary Contact: Rob C Jones, London (44) 20-7176-7041; rob.jones@standardandpoors.com
Table Of Contents
Industry Credit Outlook Rating Evolution Shows A Slightly Negative Bias GMIs' Non-Life Operations Continue To Outperform The Sector The Performance Of Life Operations Remains Mixed The Implications Of G-SII Status For Insurers Are Still Unclear Issuer Review Recent Rating Activity Contact Information Related Criteria And Research
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
SEPTEMBER 16, 2013 1

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Industry Report Card:
Global Multiline Insurers' Robust Market Positions And Improving Capital Translate Into Stable Ratings
Industry Credit Outlook
Standard & Poor's Ratings Services considers that, overall, global multiline insurers (GMIs) still display better credit quality than other insurance groups or companies. We believe this stems from their wide geographic and product diversification and generally very strong market positions, which support earnings. In addition, over the past 18 months the GMIs' capital positions continued to improve. In fact, our ratings on GMIs remain stronger than the average for all insurers we rate. Of the 15 GMIs that we rate, only three currently carry negative outlooks compared with four at the end of last year. Overview In our view, global multiline insurers (GMIs) still display better credit quality than other insurance groups. GMIs' capital positions remain a rating strength. We see mixed trends in life insurance in the growth of assets under management and new-business margins, depending on the region and product line. In non-life insurance, we see rate increases in selected product lines in several regions.
Low interest rates continue to dampen GMIs' profitability, however, particularly from life insurance business. Life operations generally have longer-term liabilities than non-life operations, and in countries where a large portion of life insurance contracts traditionally have guaranteed yields, like Japan, and Germany, low interest rates mean lower investment income to cover these costs. That said, we see mixed trends in the growth of assets under management and new-business margins, depending on the region and product line. Our economists predict a slight increase in long-term interest rates between 2013 and 2015 in the U.S., U.K., Germany, and Japan. But the forecast rates are well below those seen before the financial crisis started in 2007. We therefore don't expect GMIs' profitability over the next few years to return to precrisis levels (see chart 1). Rather, our base case is that positive interest rate momentum might ease the pressure on earnings. Although rising interest rates may also reverse the unrealized capital gains insurers enjoyed in 2011 and 2012, GMIs' capital positions remain a rating strength (see chart 2). In addition, an only gradual rise in interest rates lowers the risk of a sudden increase in policy cancellations.

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Industry Report Card: Global Multiline Insurers' Robust Market Positions And Improving Capital Translate Into Stable Ratings
Chart 1

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Chart 2
Looking at non-life insurance, we see rate increases in selected product lines in several regions. In general, GMIs tend to be ahead in this segment, thanks to leading positions in several significant markets. Although some of them are already producing strong operating profits in certain countries, we cannot rule out setbacks. Overall, we believe non-life investment returns will continue to react faster than those of life operations because the invested assets have shorter terms (see chart 3). Also, GMIs with short-tail non-life business can adjust pricing faster to interest rate changes than those with large life insurance portfolios.

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Chart 3
As we expected, the Financial Stability Board (FSB), which coordinates international regulation and standards, published a list of global systemically important insurers (G-SIIs) in July. Eight of the nine G-SIIs are GMIs we rate, and the FSB's choice is somewhat in line with our expectations. Ultimately, we believe that from 2019 onward, potentially higher capitalization requirements and stricter supervision could influence our ratings on insurance groups classified as G-SIIs.
Rating Evolution Shows A Slightly Negative Bias

We classify the GMIs, which we consider to be the top 15 global primary insurers, into three categories (see table 1).
Table 1
Classification Of Global Multiline Insurers By Business Profile

Category I II III Business focus Life and non-life activities with broad geographic reach High bias toward property/casualty with broad geographic reach High bias toward life and savings with broad geographic reach Insurers AXA, Allianz, Zurich, Aviva, Generali, AIG ACE, QBE, XL, and Tokio Marine AEGON, ING, Prudential Financial, Met Life, and Prudential PLC

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Table 1
Classification Of Global Multiline Insurers By Business Profile (cont.)

Source: Standard & Poor's.
Our ratings and outlooks on the 15 GMIs have changed little since our last article on the GMIs (see charts 4 and 5, and "What's Behind Our Ratings On The Top 15 Global Multiline Insurers Following The Application Of Our New Criteria," published June 4, 2013, on RatingsDirect).
Chart 4

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Chart 5
The three negative outlooks do not directly reflect our view of those GMIs' insurance operations. Rather, for Italy-based Generali and Japan's Tokio Marine, they mirror the outlook on the respective sovereign ratings. In July, we lowered our long-term ratings on Generali by one notch to 'A-' after the downgrade of Italy. In our view, although Generali has a very strong business risk profile, potential volatility in capitalization exposes it to a deterioration of operating and financial conditions in Italy. Our negative outlooks on the Netherlands-based ING Verzekering and its core subsidiaries indicate our view of risks to the group, including uncertainties associated with ING's planned divestment of its insurance operations. Because of the GMIs' global footprint, sovereign creditworthiness has also influenced their strategies in some cases. We see, for instance, that U.K.-based Aviva is moving out of Italy. We affirmed the ratings on Allianz SE and assigned a stable outlook despite the downgrade of Italy, where Allianz has 30 billion of exposure. Although we view Italy's creditworthiness as a significant risk to the rating, we think the group's earnings capacity and capital adequacy provide a substantial cushion.

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GMIs' Non-Life Operations Continue To Outperform The Sector

The underwriting performance of the GMIs' non-life businesses has consistently exceeded the industry average, and we expect this to continue. We believe this is owing to superior cycle management, pricing prowess, economies of scale, and geographic diversity. Nevertheless, their investment earnings--like those of other insurers--are susceptible to a prolonged period of low interest rates. GMIs' asset allocation remains conservative, however, and we don't foresee many changes in 2013 or 2014 (see chart 6). Nonetheless, we note that several GMIs have added some alternative investments, private equity, infrastructure, and real estate assets to their portfolios. But the amounts are still marginal, and in our view do not indicate a comprehensive shift in insurers' asset-allocation policies.
Chart 6
We also observe that non-life insurance rates (premiums per risk) have continued to rise during 2013, although varying by product lines and regions. Nevertheless, with ample capacity in the market, competition remains fierce. In particular, we see rates increasing in the U.S., where they had dropped more steeply than in Europe during the financial crisis and only started recovering in 2011. We believe non-life insurers have been increasing prices mainly to counteract low interest rates, which continue to linger, as well as the higher frequency and severity of catastrophe losses and diminishing reserve cushions. Given the depth of GMIs' insurance offerings and their geographic reach, we

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believe they can take advantage of pockets of favorable pricing conditions. But their ability to realize price increases often varies by region, account size, and business line. GMIs can also expand in attractive non-life markets more swiftly than smaller peers, given their established global presence, reputation, and sophisticated pricing capabilities. Emerging markets, accident and health, and specialty products remain attractive areas of growth for GMIs. On the flip side, alternative capital products have entered the market, and this is particularly evident in the number of new structured property-catastrophe transactions. These new products have not significantly affected GMIs' pricing power or competitive positions, in our view. We believe they pose greater challenges for reinsurers and actually give primary insurers more options to mitigate risk. Thanks to competitive advantages in many regions and product lines, GMIs are among the first to profit from non-life rate increases. Their combined (loss and expense) ratios remain less volatile than industry averages (see chart 7). In particular, we note the relatively low number of claims in recent years, which are unlikely to continue. We currently regard the competitive environment as fairly benign, so non-life insurers have been able to focus on underwriting profitability.
Chart 7
We also see enough capital in the market and no shortage of underwriting capacity. In our view, non-life operations

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have been increasing insurance rates mainly to compensate for the effects of low interest rates, and may continue to do so at least through 2014. However, the pace may slow as interest rates have been inching upward and many GMIs' capital adequacy remains strong, as shown, for example, by the quality of their bond holdings over recent years (see chart 8).
Chart 8
The Performance Of Life Operations Remains Mixed

We don't see a uniform trend in the GMIs' life insurance performance. In many mature life insurance markets this is due to continually low investment yields. But new-business margins and asset flows also differ from country to country (see "The Low-Interest-Rate Fog Over Global Life Insurers May Be Lifting," published on July 25, 2013). In some markets, long-term interest rates strongly influence life insurance margins. Our economists anticipate a slight increase in interest rates in 2013-2015 in the U.S., U.K., Germany, and Japan (see table 2). In our view, this should enhance profitability at the GMIs' life insurance operations, but we don't envision a return to precrisis levels in that time frame. Some of the dependence on interest rates stems from higher hedging costs for variable annuity products, as well as lower investment yields to cover fixed policyholder guarantees, such as on whole-life insurance.

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Table 2
Selected Global Interest Rate Projections*

2012 Long-term nominal interest rates (%) World U.S. Canada U.K. Emerging Europe (CIS + CEB) Eurozone Australia Japan Asia-Pacific excluding Japan Latin America & Caribbean 3.8 1.8 1.9 1.9 8.0 3.7 3.4 0.8 5.9 6.8 3.8 2.3 2.1 2.2 7.8 2.9 3.0 0.8 5.7 6.9 4.2 2.7 2.5 2.4 7.1 3.0 3.5 1.3 6.0 7.4 4.4 3.1 3.0 3.6 6.3 3.5 4.8 1.6 6.2 7.3 2013 2014 2015
*2013-2015 numbers are projections and some 2012 numbers contain estimates. Interest rates are all annual averages. CIS--Commonwealth of Independent States. CEB--Central Europe and the Balkans. Sources: Standard & Poor's, "U.S. Economic Forecast: A Mighty Wind," published Aug. 23, 2013, and Global Economic Outlook: An Expansion With Complex Cross-Currents, published May 15, 2013.
We still believe that one of the key risks for life insurance operating performance is the ongoing low-yield environment, despite the forecast increase in interest rates. GMIs' repricing and restructuring of their life insurance product portfolios, in our view, indicate prudent assumptions on interest rate development. We have also observed some repricing of life insurance products and variable annuities in the U.S. in recent years. Also, GMIs in more traditional life insurance markets, like Germany, are designing and launching products that require less capital, possibly with fewer policyholder options and lower or no guaranteed yields. The mixed trends in inflows and outflows of life insurance assets under management in different regions mirror clients' acceptance of products that don't typically offer the same level of guaranteed yields. Europe-based GMIs' new-business margins remain stable, but lower than historically high levels (see chart 9). In our view, this is due to these groups' efforts to increase cost efficiency and ongoing product repricing. An overall increase in risk and expense margins has reduced some of the pressure on overall margins as investment yields remain low. However, because European GMIs report embedded-value figures, assumptions on underlying risk-free interest rates are still by far the biggest influence on their results. Embedded value is the net asset value plus the present value of future profits from a life insurance portfolio.

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Chart 9
The Implications Of G-SII Status For Insurers Are Still Unclear

Eight of the nine groups the FSB classified as G-SIIs in July are GMIs we rate: AIG, Allianz, Aviva, AXA, Generali, Metlife, U.S.-based Prudential Financial, and U.K.-based Prudential PLC. Ping An is the only non-GMI on the list. We are uncertain about what requirements G-SIIs will need to fulfill, be they higher capitalization, more detailed risk reporting, or stricter supervision (see "Possible Ratings Implications For Global Systemically Important Insurers," published July 19, 2013). Consequently, the GMIs' designation as G-SIIs has had no immediate consequences for the ratings. In any event, we believe any incremental capital requirements are unlikely to be imposed until 2019 at the earliest. This might put G-SIIs at a slight disadvantage relative to other insurers. On the other hand, G-SIIs may benefit from a more favorable perception of their status in the market, for example because of the potential for government support. That said, we do not reflect potential government support in our insurance ratings. We understand that the FSB will update the G-SII list in November, and we will continue to monitor the FSB's selection criteria. The initial list was based on companies' 2011 balance sheets and some restructuring has taken place

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since then. Generali, for instance, has narrowed its business focus and disposed of non-core assets, which could prompt the FSB to review its inclusion as a G-SII. Before the FSB published its list of G-SIIs back in July, the U.S. Financial Stability Oversight Council had already announced that it regarded AIG and Prudential Financial as potentially nationally systemic entities, a decision Prudential Financial is appealing.
Issuer Review
Table 3
Global Multiline Insurance Groups

Company or group ACE Ltd. Counterparty credit rating; financial strength rating Holding company: A/Positive/--; operating companies: AA-/Positive
Analyst Tracy Dolin
Country U.S.
Comments The ratings on ACE Ltd. and related core operating subsidiaries (together ACE) reflect our view of the company's very strong business risk profile, supported by an extremely strong competitive position. In addition, the group has a very strong financial risk profile, reflecting extremely strong capital and earnings and strong financial flexibility, partly offset by a moderate risk profile. ERM and management are very strong and further support the ratings. We believe ACE will continue to post superior operating performance relative to its multiline insurance peers, supporting its extremely strong capital adequacy and competitive position. Furthermore, we expect ACE's diverse business mix and prudent catastrophe-management practices to continue reducing the group's exposure to any one line of business, and its earnings to be among the least volatile in its peer group. The ratings reflect our view of the group's very strong business risk and financial risk profiles, built on a very strong competitive position and very strong capital and earnings. AEGON has demonstrated its commitment and ability to maintain 'AA' levels of capital adequacy, even through the financial crisis. The group reported operating earnings of 1.8 billion in 2012, and we expect this to increase modestly over 2013-2015, translating into net income of 1.1 billion-1.4 billion. AEGON's risk position reflects intermediate risks, benefiting from its strong ERM and relatively low exposure to direct unhedged equities. We expect AEGON to maintain the strength of its balance sheet and the business and financial profiles of its key U.S. operations. The ratings on AIG Inc. reflect our view of the group's very strong business risk profile and strong financial risk profile, built on a very strong competitive position and very strong capital and earnings. We regard AIG's ERM and management and governance practices as consistent with the ratings. The stable outlook for AIG's property/casualty (P/C) and life operations reflects our belief that the group will sustain its competitive position, while P/C improves operating results to a level more consistent with AIG's peers' and life continues its strong operating performance. We expect consolidated capitalization to remain strong, supporting capital adequacy of the insurance companies commensurate with the ratings and the capital requirements of the remaining non-core and run-off operations.
AEGON N.V.
Holding company: A-/Stable/A-2; core operating companies: AA-/Stable
Sanjay Joshi
Netherlands
American International Group Inc.
Holding company: A-/Negative/A-2; operating companies A+/Stable
John Iten
U.S.

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Table 3
Global Multiline Insurance Groups (cont.)

Allianz SE Holding company: AA/Stable/A-1+; operating companies: AA/Stable Volker Kudszus Germany The ratings reflect our view of the group's excellent business risk profile and very strong financial risk profile, built on an extremely strong competitive position and very strong capital and earnings. Our assessment of ERM as very strong reflects our positive view of the risk-management culture, risk controls, and strategic and emerging risk management of this highly complex organization. We anticipate that Allianz group's capital adequacy will remain in the 'AA' range. In our view, the group's restored capital adequacy provides a substantial buffer against tough economic conditions in Italy and low interest rates, especially in Germany. We also anticipate that the group will maintain earnings consistent with our base case, mainly with at least a steady profit contribution from non-life and asset management, and an extremely strong competitive position. We lowered the ratings on Generali and its core subsidiaries to 'A-' from 'A' after the downgrade of Italy and limit them to two notches above the long-term rating on Italy. This is because we consider Generali's capitalization to be a relative weakness, although it has a very strong business risk profile with broad international diversification. Potential volatility in capitalization exposes Generali to deterioration in operating and financial conditions in Italy. Our assessment of Generali's moderately strong capital and earnings rests on our expectation that its profitability will recover and that it will complete several asset sales. These expectations are sensitive to changes in operating and financial conditions in Italy. The negative outlook primarily reflects that on Italy. In addition, the negative trend of operating and financial conditions in Generali's key Italian market could delay capital rebuilding and reduce Generali's ability to successfully execute its strategy. The ratings reflect our view of the group's very strong business risk profile and moderately strong financial risk profile, built on a very strong competitive position and strong capital and earnings. In our view, Aviva's risk position reflects moderate risks, driven by volatility of both capital adequacy and bottom-line profitability, as seen through 2011 and 2012. Aviva has strong financial flexibility, due to proven access to capital markets, and exceptional liquidity relative to its needs. In our view, the execution of the group's strategic plan will continue to bolster its financial risk profile without impairing its business risk profile. AXA's very strong business risk profile is built on an extremely strong competitive position and intermediate industry and country risks. We assess the financial risk profile as moderately strong because of the relative weakness of capital adequacy and inherent volatility from the group's somewhat higher investment leverage than peers' and reliance on weaker forms of capital. In our opinion, AXA's ERM, management, and governance are strong, reflecting the group's ability to manage its risks within tolerances. In our opinion, the group's ongoing execution of its strategy will likely strengthen earnings retention, while its strong ERM will likely maintain risk exposures within tolerances. The ratings reflect our view of ING Verzekeringen N.V.'s (INGV) strong business risk profile, based on the strength of its foothold within Europe and the Dutch market in particular, and its strong financial risk profile. Our expectation is that INGV will maintain its balance sheet strength through the IPO of ING's European insurance business and the divestment of the Asian and U.S operations. The negative outlook reflects our view of the risks relating to the group's financial risk profile, including uncertainties associated with the divestment by ING Groep (ING) of its insurance operations, as well as wider economic factors such as low interest rates. The negative outlook also reflects that on ING.
Assicurazioni Generali SpA
Holding company: A-/Negative/-- ; core operating companies: A-/Negative
Taos Fudji
Italy
Aviva PLC
Holding company: A-/Stable/A-2; core operating companies: A+/Stable
Simon Ashworth
U.K
AXA
Holding company: A-/Stable/A-2; core operating companies: A+/Stable
Lotfi Elbarhdadi
France
ING Verzekeringen N.V.
Holding company: A-/Negative/A-2; core operating companies: A+/Negative
Simon Ashworth
The Netherlands

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Table 3

MetLife Holding company:A-/Stable/A-2 ; core operating companies: AA-/Stable Shellie Stoddard U.S. The ratings on MetLife Inc. (MET) reflect our view of the group's very strong business risk profile and financial risk profile. MET has a very strong competitive position, in our view, predicated on its brand name recognition, global scale, and ability to positively differentiate itself from its competitors in key insurance markets. The group also has very strong global capital and earnings capabilities. We regard MET's ERM and management and governance practices as supportive of the ratings. In our view, MET's business and financial risk profiles are likely to remain very strong. We anticipate the group will maintain operating performance that at least matches that of key competitors in the same market, its very strong overall competitive position, and strong financial flexibility. In 2013, we expect fixed-charge coverage to remain above 6x and financial leverage to stay at about 30%-35%. The ratings on Prudential Financial Inc. (PRU) reflect our view of the group's very strong business and financial risk profiles. We base these assessments on PRU's very strong competitive position, reflecting well-established market positions in the U.S. and Japan, well-diversified distribution channels, innovative product designs, and a favorable brand and reputation. Regarding financial risk, PRU reports very strong capital and earnings and strong financial flexibility. We anticipate that PRU's U.S. operating subsidiaries will sustain their very strong competitive position and maintain capital adequacy consistent with the 'AA-' category. In 2013, we expect fixed-charge coverage of at least 8x on a pretax adjusted operating income basis, with further improvement in 2014. We expect the group's debt leverage to remain less than 20% and its total financial leverage, including hybrids, to remain less than 30%. Although PRU's recent large pension-risk transfers could increase operating earnings, it is unclear whether this improvement is sustainable, especially in view of potential longevity risk. The ratings on Prudential and its core subsidiaries predominantly reflect our view of the group's excellent business risk profile and very strong financial risk profile. Prudential has an extremely strong competitive position in our view, mainly stemming from its market leading positions across different geographies, product lines, and risk types. Overall, we assess capital and earnings as very strong. We expect the group to continue to manage variable annuity volumes and market risk exposures in line with its risk appetite and to keep improving the balance of risks and earnings from its U.S. business. In our view the group's growth strategy will not adversely affect its risk profile and that disciplined risk and capital management will protect its balance sheet. The ratings reflect our view of QBE's very strong business risk profile and moderately strong financial risk profile, owing to a very strong competitive position, stemming primarily from geographic and product diversity, and strong capital and earnings. QBE has shown strong financial flexibility through its ability to access debt and equity markets. We expect financial leverage and EBITDA interest cover ratios of 29% and 5.6x, respectively, at the end of fiscal 2012 to strengthen marginally over 2013-2015 as QBE looks to reduce leverage. We believe that QBE's capital adequacy will improve to the 'A' range over that period and that there won't be material reserve strengthening. We also anticipate that the group will maintain its very strong competitive position and its operating performance will stay consistent with our base case. In our view, QBEs interim 2013 results were modest and reserve increases and premium growth lower than we expected, due to the difficult environment for lender-placed business. Nevertheless, the group's combined (loss and expense) ratio was a sound 93% for the first half of 2013, with regulatory capital adequacy remaining solid and gearing improving slightly.
Prudential Financial Inc.
Holding company: A/Stable/A-1; core operating companies: AA-/Stable
Li Cheng
U.S.
Prudential PLC
Holding company:A+/Stable/A-1 ; core operating companies: AA/Stable
Simon Ashworth
U.K.
QBE Insurance Group Ltd.
Holding company: A-/Stable/--; core operating companies: A+/Stable
Mark Legge
Australia

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Table 3

Tokio Marine Holdings Inc. Holding company: not rated; core operating companies: AA-/Negative Reina Tanaka Japan In our view, the Tokio Marine Group has a very strong business risk profile, built on an extremely strong competitive position and intermediate industry and country risk. In particular, Tokio Marine Group's brand, market position, and product diversity are key strengths in our opinion. We consider Tokio Marine Group to have a strong financial risk profile, underpinned by strong capital and earnings, an intermediate risk position, and strong financial flexibility. In our base case, we assume the group will earn net income of at least 140 billion annually for fiscal 2013 and 2014, compared with about 71 billion on average during the past five years. We assess ERM as strong, owing to our positive view of the group's risk-management culture, risk controls, risk and economic capital models, and strategic risk management. The negative outlook reflects our view that the group's credit profile is constrained by the sovereign ratings on Japan, given that the core operating entities' business franchises and asset structures largely depend on the domestic market. The ratings on XLIT Ltd. reflect our view of the group's strong business and financial risk profiles, built on extremely strong capital and earnings and partly offset by high risk. We anticipate strong earnings to result from the continuation of strong underwriting performance, further optimization of the investment portfolio, and the materially reduced risk profile of the run-off businesses. More importantly, we expect the continued focus and recent enhancement of ERM to a strong level to reduce the frequency and severity of unanticipated losses. Additionally, we note that XLIT's financial flexibility metrics are improving, which also supports our positive outlook on the ratings. The ratings reflect our view of the group's very strong business and financial risk profiles, built on an extremely strong competitive position, mainly thanks to its geographic and product diversity, and very strong capital and earnings. Despite low investment yields, we anticipate in our base case that the group will continue to report very strong capital and earnings. We assume that Zurich Insurance Co. Ltd. (ZIC) will report an operating profit of US$4.0 billion-US$5.5 billion annually for 2013-2015. We anticipate that ZIC's competitive position will remain extremely strong, underpinned by our base-case assumption of the group maintaining favorable operating performance.
XLIT Ltd.
Holding company: BBB+/Positive/--; core operating companies A/Positive
Taoufik Gharib
Cayman Islands
Zurich Insurance Co. Ltd.
Holding company: not rated; core operating companies: AA-/Stable
Volker Kudszus
Switzerland
ERM--Enterprise risk management.
Recent Rating Activity

Table 4
Global Multiline Insurers--Rating/Outlook/CreditWatch Actions*

Issuer ACE Ltd. To A/Positive/-From A/Stable/-Date May 22, 2013 Reason The positive outlook reflects our view that ACE will continue to post superior operating performance relative to its multiline insurance peers, supporting its extremely strong capital adequacy and extremely strong competitive position in the next two-to-three years. Furthermore, we expect ACE's diverse business mix and prudent catastrophe-management practices to continue reducing the group's exposure to any one line of business, and its earnings to be among the least volatile in its peer group.

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Table 4
Global Multiline Insurers--Rating/Outlook/CreditWatch Actions* (cont.)

American International Group (PC Subsidiaries) A+/Stable/-A/Stable/-May 6, 2013 The stable outlooks on AIG's property/casualty operating subsidiaries (collectively, AIG PC) and life insurance subsidiaries (AIG L&R) reflect our belief that the group will sustain its competitive position, while AIG PC improves its operating results to a level more consistent with its peers', and AIG L&R continues to report strong operating performance. We expect consolidated capitalization to remain strong, supporting capital adequacy of the insurance companies at a level commensurate with the rating level and the capital requirements of the remaining noncore and runoff operations. We believe AIG's enterprise risk management should continue improving as the operating companies implement enhanced risk-management processes and fully integrate them throughout the AIG organization. In 2013, we believe AIG PC will report a combined ratio of around 103%, including our estimate for a catastrophe load of about 4% (average annual loss) and assuming minimal prior-year reserve development. This should translate into pretax operating income (before net realized capital gains/losses) of $3.5 billion-$4 billion. We expect AIG L&R to continue its strong operating performance and to generate pretax operating income of about $4 billion, slightly less than in 2012 due to pressure on net investment income from low interest rates. The stable outlook reflects our view that Allianz SE's capital adequacy will remain in the 'AA' range. In our view, the group's capital adequacy provides a substantial buffer against tough economic conditions in Italy and low interest rates, especially in Germany. We also anticipate that the group will maintain earnings consistent with our base case, with at least a steady profit contribution from non-life and asset management (PIMCO), and an extremely strong competitive position. We lowered our long-term ratings on Generali and its core subsidiaries after the downgrade of Italy. While our view of the 'a' anchor is unchanged, the rating is limited to two notches above that on Italy. The outlook is negative, both because of the negative outlook on the sovereign rating on Italy and the negative trend regarding operating and financial conditions in Generali's key Italian market. The stable outlook reflects our view that the group's growth strategy will not adversely affect its risk profile and that disciplined risk and capital management will protect its balance sheet. Our base-case assumption is that the group will continue to focus on accelerating growth in Asia, maintaining a strong position in the U.S. market and selective participation in the U.K., and expanding its asset management operations. In our view, this diversity somewhat insulates the group's business profile from the difficult global macroeconomic environment. We expect growth across the group and within each region to be balanced and do not expect it to constrain our assessment of the group's business or financial risk profiles. The stable outlook also reflects our view that Prudential's current competitive advantages will remain resilient to competitive pressures and that the group will maintain its current strong levels of operating performance. The stable outlook reflects our view that QBE's capital adequacy will improve to the 'A' range over 2013-2015 and that there will be no material reserve strengthening over this time frame. We also anticipate that the group will maintain its very strong competitive position and that its operating performance will stay consistent with our base case.
Allianz SE
AA/Stable/A-1+
AA/Stable/A-1+
July 12, 2013
Assicurazioni Generali Spa
A-/Negative/--
A/Watch Neg/--
July 12, 2013
Prudential PLC
A+/Stable/A-1
A+/Negative/A-1
May 22, 2013
QBE Insurance Group
A-/Stable/--
A/Negative/--
May 22, 2013
*From Jan. 1, 2013, through to Sept 6, 2013.
Contact Information

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Table 5
Contact Information
Credit analyst Simon Ashworth, Director Ralf Bender, Senior Director Mark Button, Senior Director Matthew Carroll, Senior Director Li Cheng, Director Tracy Dolin, Director Lotfi Elbarhdadi, Director Taos Fudji, Director Taoufik Gharib, Director John Iten, Director Rob Jones, Managing Director Sanjay Joshi, Associate Director Volker Kusdzus, Director Mark Legge, Director Miroslav Petkov, Director Location London Frankfurt London New York New York New York Paris Milan New York New York London London Frankfurt Telephone (44) 20-7176-7243 E-mail Simon.Ashworth@standardandpoors.com
(49) 69-33-999-194 ralf_bender@standardandpoors.com (44) 20-7176-7045 (1) 212-438-3112 (1) 212-438-1849 (01) 212 438 1325 (33) 1-4420-6730 (39) 02 72111276 (1) 212-438-7253 (1) 212-438-1757 (44) 20-7176-7041 (44) 20-7176-7087 (49) 69 33999 192 mark_button@standardandpoors.com matthew_carroll@standardandpoors.com li.cheng@standardandpoors.com tracy_dolin@standardandpoors.com lotfi.elbarhdadi@standardandpoors.com taos.fudji@standardandpoors.com taoufik.gharib@standardandpoors.com john.iten@standardandpoors.com rob.jones@standardandpoors.com sanjay.joshi@standardandpoors.com volker.kudszus@standardandpoors.com mark.legge@standardandpoors.com miroslav_petkov@standardandpoors.com shellie.stoddard@standardandpoors.com reina.tanaka@standardandpoors.com
Melbourne (61) 3-9631-2041 London (44) 02071767043 (01) 212 438 7244 (81) 3 4550 8587
Shellie A Stoddard, Senior Director New York Reina Tanaka, Associate Director Tokyo
Related Criteria And Research

Related criteria
Group Rating Methodology, May 7, 2013 Insurers: Rating Methodology, May 7, 2013 Principles Of Credit Ratings, Feb. 16, 2011 Refined Methodology And Assumptions For Analyzing Insurer Capital Adequacy Using The Risk-Based Insurance Capital Model, June 7, 2010
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U.S. Economic Forecast: A Mighty Wind, Aug. 23, 2013 The Low-Interest-Rate Fog Over Global Life Insurers May Be Lifting, July 25, 2013 Possible Ratings Implications For Global Systemically Important Insurers, July 19, 2013 Global Insurance Key Risks And Credit Trends: At Mid-Year, Low Interest Rates And Regulation Prevail, July 18, 2013 What's Behind Our Ratings On The Top 15 Global Multiline Insurers Following The Application Of Our New Criteria, June 4, 2013 Global Economic Outlook: An Expansion With Complex Cross-Currents, May 15, 2013 Global Multiline Insurers' Credit Quality Remains Strong, But Many Hurdles Lie Ahead, Jan. 17, 2013
Additional Contact: Insurance Ratings Europe; InsuranceInteractive_Europe@standardandpoors.com

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Industry Report Card:

SEPTEMBER 16, 2013 1

Industry Report Card:

SEPTEMBER 16, 2013 2

SEPTEMBER 16, 2013 3

SEPTEMBER 16, 2013 4

Rating Evolution Shows A Slightly Negative Bias

Classification Of Global Multiline Insurers By Business Profile

SEPTEMBER 16, 2013 5

Classification Of Global Multiline Insurers By Business Profile (cont.)

SEPTEMBER 16, 2013 6

SEPTEMBER 16, 2013 7

GMIs' Non-Life Operations Continue To Outperform The Sector

SEPTEMBER 16, 2013 8

SEPTEMBER 16, 2013 9

The Performance Of Life Operations Remains Mixed

SEPTEMBER 16, 2013 10

Selected Global Interest Rate Projections*

SEPTEMBER 16, 2013 11

The Implications Of G-SII Status For Insurers Are Still Unclear

SEPTEMBER 16, 2013 12

Global Multiline Insurance Groups

Analyst Tracy Dolin

Holding company: A-/Stable/A-2; core operating companies: AA-/Stable

American International Group Inc.

Holding company: A-/Negative/A-2; operating companies A+/Stable

SEPTEMBER 16, 2013 13

Global Multiline Insurance Groups (cont.)

Assicurazioni Generali SpA

Holding company: A-/Negative/-- ; core operating companies: A-/Negative

Holding company: A-/Stable/A-2; core operating companies: A+/Stable

Holding company: A-/Stable/A-2; core operating companies: A+/Stable

ING Verzekeringen N.V.

Holding company: A-/Negative/A-2; core operating companies: A+/Negative

SEPTEMBER 16, 2013 14

Global Multiline Insurance Groups (cont.)

Prudential Financial Inc.

Holding company: A/Stable/A-1; core operating companies: AA-/Stable

Holding company:A+/Stable/A-1 ; core operating companies: AA/Stable

QBE Insurance Group Ltd.

Holding company: A-/Stable/--; core operating companies: A+/Stable

SEPTEMBER 16, 2013 15

Global Multiline Insurance Groups (cont.)

Holding company: BBB+/Positive/--; core operating companies A/Positive

Zurich Insurance Co. Ltd.

Holding company: not rated; core operating companies: AA-/Stable

ERM--Enterprise risk management.

Recent Rating Activity

Global Multiline Insurers--Rating/Outlook/CreditWatch Actions*

SEPTEMBER 16, 2013 16

Global Multiline Insurers--Rating/Outlook/CreditWatch Actions* (cont.)

July 12, 2013

Assicurazioni Generali Spa

July 12, 2013

May 22, 2013

QBE Insurance Group

May 22, 2013

*From Jan. 1, 2013, through to Sept 6, 2013.

SEPTEMBER 16, 2013 17

Related Criteria And Research

SEPTEMBER 16, 2013 18

SEPTEMBER 16, 2013 19

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