Moody’s Investors Service has downgraded three Italian insurers in reflection of the Italian sovereign’s weakening credit worthiness.
Assicurazioni Generali SpA and its subsidiaries’ insurance financial strength ratings have been downgraded three notches to Baa1 from A1.
Allianz SpA has had its IFSR rating cut to A3 from A1 with a negative outlook, while Unipol Assicurazioni SpA’s IFSR has been downgraded to Baa2 from A3 and remains on review for downgrade.
Moody’s downgraded the Italian government’s bond ratings to Baa2 from A3 on 13 July.
The ratings agency noted that the IFSRs of two of the three insurers, Generali and Allianz, remain above the sovereign rating, reflecting in the former the significant geographical diversification of the Generali Group, and in the latter the benefits of ownership by a strong parent.
“The downgrade of Generali reflects the insurer’s direct exposure to Italian sovereign risk in terms of investment portfolio and business profile,” Moody’s said.
“As at year-end 2011, Italian government bonds represented 19% (€46 bn) of Generali’s total fixed-income portfolio, or 253% of shareholders’ equity (gross, before policyholders’ participation), and 29% of its gross written premiums were sourced in Italy in 2011.
“As part of this action, Moody’s reduced the notching differential between Generali’s IFSR and the Italian sovereign rating to one notch from two notches.
“The one-notch differential continues to reflect the insurer’s broad diversification and flexible product characteristics, which serve to reduce the impact to the group from stress related to the Italian sovereign.
“In particular, Generali Group’s non-Italian businesses accounted for over 70% of GWP in 2011, and Moody’s believes that the risk-sharing mechanism of the insurer’s Italian life insurance products somewhat mitigates its exposure to Italian sovereign credit risk.
“The IFSR of Allianz SpA (Allianz Italy), which is fully owned by Allianz SE, has been downgraded by two notches to A3, negative outlook.”
Moody’s added that the downgrade of Allianz Italy reflects the insurer’s direct exposure to Italian sovereign risk in terms of investment portfolio and business profile.
“Italian government bonds represented around 60% of Allianz Italy’s total fixed-income portfolio, and over 500% of shareholders’ equity, and 100% of its GWP was sourced in Italy in 2011,” the agency said.
“Nonetheless, Moody’s continues to rate Allianz Italy’s IFSR two notches above the Italian sovereign rating, reflecting the benefit of potential parental support from Allianz SE.
“Allianz Italy is the second-largest operation outside Germany for Allianz SE, and is consistently one of the largest contributors in terms of premiums and operating profit.”
Francesca Nyman – Insurance Insight 19/07/2012
