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Lloyd Adriatico A- Rating Assigned by S&P; Outlook Stable

6 November 1998

Lloyd Adriatico A- Rating Assigned by S&P; Outlook Stable

    LONDON, Nov. 6 -- Standard & Poor's today assigned its
single-'A'-minus counterparty credit and financial strength ratings to Lloyd
Adriatico SpA. (LA), a subsidiary of triple-'A'-rated Allianz AG.  The ratings
reflect LA's good business position, strong capital on a risk-adjusted basis,
good quality of management, and operational efficiency.  Offsetting these
strengths, the company relies heavily on the domestic motor market, which has
led to a somewhat lackluster operating performance.  The outlook is stable.

    Major Rating Factors:

    -- Good business position:  LA primarily is a nonlife insurer specializing
       in motor lines.  Its extensive agency network, well-established brand
       and, most of all, its highly competitive expense ratio have allowed the
       company to capture a stable 6% of the Italian motor third-party
       liability (MTPL) market and a 5.6% share in the remaining profitable
       motor lines.  However, LA has yet to leverage fully its 2.5 million
       motor customer base to translate its good position into nonmotor lines,
       in which it has a 2.5% market share.  The company's position is
       complemented by a growing, although modest, and profitable life
       portfolio, with the added benefit of access to the rapidly growing
       bancassurance channel through a joint venture with Banca Antoniana
       Veneta.
    -- A strong level of capital:  Capitalization is strong on a risk-adjusted
       basis, with a capital adequacy ratio of 139% at the end of 1997, after
       conservative adjustments were made to reflect the ongoing uncertainty
       surrounding the ultimate cost for bodily injuries in the Italian
       market.
    -- Quality of management and operational efficiency:  Management is
       competent and has an in-depth knowledge of its core motor market.  In
       addition, LA is run efficiently with a lean structure, translating into
       an expense ratio several percentage points below the market average.
       Although LA has shown a tolerance for risk by growing market share
       through aggressive pricing and reserving policies before the
       acquisition by Allianz in 1995, Standard & Poor's believes that current
       management aims to maintain sound underwriting.
    -- A member of the Allianz group:  LA was purchased by the Allianz Group
       of Germany from Swiss Re in 1995.  The German group already owns
       Riunione Adriatia di Sicurta SpA., the second-largest domestic
       insurance company.  However, the two companies are run independently,
       operating through different distribution channels and trade names,
       catering for different segments of the markets.  Synergies between LA
       and RAS have been limited to date.
    -- A domestic player relying on the domestic motor market:  LA focuses
       solely on the Italian market and particularly is exposed to the
       fortunes of the domestic motor market.  At the end of 1997, the company
       derived 65% of its Italian lira (ITL) 2.2 trillion ($1.33 billion)
       premium income from motor lines, with a strong emphasis on MTPL, a
       notorious loss-making class of business.
    -- An adequate operating performance:  LA's marginal underwriting
       performance over 1993-1997, with a combined ratio of 111%, reflects the
       company's emphasis on MTPL and the reserve strengthening exercise
       carried out from 1995.  When adjusting for the latter, the 1995-1997
       average combined ratio falls to 107% from a published 112%.  Surplus
       arising from LA's profitable life portfolio, with a return on assets
       averaging a good 1.2% over the period, has compensated slightly for the
       nonlife results, such that the company generated an adequate 9.3%
       overall return on equity over 1993-1997.

        Expectations:
        LA's premium growth will remain at a controlled level as the company
    maintains tight underwriting in its motor portfolio.  However, LA will
    improve the leveraging of its motor customer base to cross sell nonmotor
    products.  The risk-adjusted capital score will remain in 125%-150% in
    1998 and 1999.  Operating results will remain at a similar level, with
    improved underwriting results LA's nonlife activities offset by a gradual
    decline in life profits, Standard & Poor's said. -- CreditWire