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Moody's changes the outlook on Generali Garant's Baa2 Local Currency IFS rating to Negative

December 10, 2008 | "Moody’s"

Outlook on Ba3 Foreign Currency IFSR changed to Stable from Positive

London, 09 December 2008 -- Moody's Investors Service has today announced
that it changed the outlook on the Baa2 local currency insurance
financial strength rating (IFSR) of the Ukrainian insurance company
Generali Garant to Negative from Stable, and the outlook on the Ba3
foreign currency IFSR to Stable from Positive. The outlook on the
National scale rating remains stable. All ratings were affirmed.

The negative outlook on the local currency rating reflects concerns about
the standalone strength of Generali Garant and the worsening business
environment in Ukraine, and to some extent the support factored into the
rating from Generali Garant's owners, which include Assicurazioni
Generali (rated Aa3 IFSR).

Although exposure has reduced in recent years, Generali Garant does
invest in local stock and investment markets and has seen losses during
2008 where the Ukraine stock market has fallen by approximately 76%. In
addition the liquidity freeze in the Ukraine bank sector has curtailed
lending for new cars which is a significant driver of motor insurance
premium. Generali Garant's largest line of business, as in most non-life
insurers in the Ukraine, is motor insurance.

Generali has entered into agreements on future transfer of its ownership
of Generali Garant from Generali Holding Vienna to Generali PPF Holding
B.V. as part of the consolidation of all its CEE and CIS business
operations under one holding company. Generali PPF Holding B.V. is owned
51% by Assicurazioni Generali and 49% by PPF Col B.V. Nevertheless, the
transaction is not yet in force and Generali Garant is ultimately
controlled by Assicurazioni Generali through Generali Holding Vienna AG
at the moment. While Generali is committed to Ukraine as a region, in
Moody's opinion this change could reduce the ability of Generali to
inject further capital into Generali Garant while not diluting the
ownership percentages of the 3rd parties. On a positive side, Moody's
notes the reinsurance support Generali provides and the Generali name
being taken by Generali Garant.

Generali Garant has not published audited IFRS statements since YE2005,
although YE2006 accounts are expected to be audited fairly soon. It
continues to publish audited Ukrainian GAAP statements and reports
internally to Generali using a modified form of IFRS. Disclosure under
local GAAP is not so transparent in comparison with IFRS, and asset
valuation differs significantly from IFRS.

Moody's current ratings on Generali Garant reflect the company's strong
franchise in the Ukrainian P&C market, a well-developed regional
network, underwriting expertise in the motor business, as well as
integration into the Generali Group. This is offset by Generali Garant's
high expense ratio, limited product diversification and geographic
diversification outside the country, a track record of weak
profitability, as well as a concentration of invested assets in real
estate. The foreign currency IFSR is currently constrained by Ukraine's
Ba3 foreign currency bond ceiling.

The following ratings were affirmed with a Negative outlook:

Generali Garant -- local currency insurance financial strength rating of
Baa2, negative outlook;

The following ratings were affirmed with a Stable outlook:

Generali Garant -- foreign currency insurance financial strength rating
of Ba3, stable outlook.

Generali Garant -- national scale rating of Aaa.ua, stable outlook.

Based in Kiev, Ukraine, Generali Garant is ultimately controlled by
Assicurazioni Generali SpA through Generali Holding Vienna AG. In 2007,
Generali Garant reported Gross Premiums Written of UAH527.8 million
compared to UAH360.6 million in 2006. Shareholders' equity under local
GAAP was UAH83.5 million as at 31 December 2007.

The last rating action was on 12th August 2008 when the Ba3 foreign
currency rating of Generali Garant has confirmed with a Positive outlook.

Company: Generali Garant

Full company nameGenerali Garant OJSC
Country of riskUkraine

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