Moody's reviews Assicurazioni Generali's debt ratings for downgrade on Italian reorga
Announcement:
Global Credit Research - 18 Dec 2012
London, 18 December 2012 -- Moody's Investors Service today placed on review for possible downgrade the Baa2 senior debt rating, the Baa3 (hyb) subordinated debt rating and the Ba1 (hyb) preferred stock debt ratings of Assicurazioni Generali SpA and Generali Finance B.V.. The insurance financial strength ratings of the group's operating entities are unaffected.
RATINGS RATIONALE
The review for possible downgrade reflects an expected change in the nature of protection afforded to Assicurazioni Generali SpA's creditors following the reorganisation of the Italian operations announced last Friday. Currently Assicurazioni Generali SpA has a dual function within the Generali group, acting as a primary insurer in its own right, operating through branch offices in Italy and other countries, and also acting as the parent company of the Generali group. As a result, debt at the parent holding company benefits from narrower notching than Moody's standard practice for holding companies, as a result of (i) the stand-alone capitalization and cash-flows generated by the parent's insurance operations and (ii) the Generali group's overall business diversification and sources of earnings and cash flows available from its subsidiaries to the holding company, helping service Generali's overall cash needs.
The reorganisation of the Italian operations envisages the creation of a newco, Assicurazioni Generali Italia, and the transfer of Assicurazioni Generali SpA's primary insurance policyholder obligations to this newco. As a result, Assicurazioni Generali SpA will become more of a pure holding company, albeit it will retain the group's reinsurance business. This change of nature of Assicurazioni Generali SpA may exercise some pressure on the debt ratings issued or backed by the holding company, since it will no longer operate as a primary insurer in the Italian market. As a result, the scope of the cashflows directly available to holding company creditors are likely to reduce and its largely liquid base of diversified assets replaced by a more concentrated, and less liquid, investment in a regulated Italian insurance business. The review for debt ratings at Assicuraziona Generali SpA will focus on the analysis of the cash flows, profit and loss and balance sheet structure of the holding company, as well as the nature of the any intragroup contractual arrangements, including any reinsurance arrangements, between the holding company and its subsidiaries
Moody's said that the Baa1 IFSR at Assicurazioni Generali SpA is unaffected by the announcement. We expect policyholders to continue to benefit from the franchise, operational and other benefits of the broader Generali group, as well as from the operational improvements expected in the Italian business. Assicurazioni Generali Italia, which will be fully operational from November 2013, will integrate the insurance businesses of Assicurazioni Generali SpA and the other Italian entities including Toro, Fata and Ina Assitalia and will control Alleanza, Genertel and Banca Generali. The new organisational structure will be based on a multi-channel model and will reduce current fragmentation by consolidating businesses and brands with similar customers, product ranges and distribution models. The company has announced that 10 existing brands will be integrated through the reorganisation into three companies in 2015, Assicurazioni Generali Italia, Alleanza and Genertel, which will manage their respective brands, business areas and distribution channels. Generali expects the new structure to maximise Generali's market potential and improve customer service capability in Italy.
The following ratings were placed on review for possible dowgrade:
Assicurazioni Generali S.p.A., -- Senior debt rating Baa2
Assicurazioni Generali S.p.A. -- Subordinated debt rating Baa3 (hyb)
Assicurazioni Generali S.p.A. -- Preferred stock debt rating Ba1 (hyb)
Generali Finance B.V. -- Guaranteed Senior debt rating Baa2
Generali Finance B.V. -- Guaranteed Subordinated debt rating (P) Baa3
Generali Finance B.V. -- Guaranteed Preferred stock debt rating Ba1 (hyb)
METHODOLOGY USED
The methodologies used in these ratings were Moody's Global Rating Methodology for Life Insurers published in May 2010, Moody's Global Rating Methodology for Property and Casualty Insurers published in May 2010, and Moody's Guidelines for Rating Insurance Hybrid Securities and Subordinated Debt published in January 2010. Please see the Credit Policy page on
Moody's - credit ratings, research, tools and analysis for the global capital markets for a copy of these methodologies.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on
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Antonello Aquino
Senior Vice President
Financial Institutions Group
Moody's Investors Service Ltd.
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Simon Harris
MD - Financial Institutions
Financial Institutions Group
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