(Adds details, comments from analyst call)
By Andrea Mandala
MILAN, March 19 (Reuters) - Italian insurer Cattolica Assicurazioni still plans to pay a dividend for 2019 even though its capital position is under pressure due to the market volatility linked to the coronavirus outbreak, the company said on Thursday.
Italy’s fifth-biggest insurer, whose top investor is Warren Buffett’s Berkshire Hathaway, said, however, that it was postponing a decision on the dividend level until it has a better picture of the impact of the virus on its business.
On Wednesday, Europe’s insurance watchdog EIOPA said companies should take measures to preserve their capital position and be prudent about dividend and bonus payments as the coronavirus disrupts households and businesses.
“Our dividend policy gives us some flexibility to pay a dividend also with the solvency ratio below the optimal range,” Cattolica Chief Financial Officer Enrico Mattioli told analysts.
Mattioli said the company’s solvency ratio, a key measure of its financial strength, was below 170%-180% in the last few days, a range considered by the insurer as optimal.
The ratio was 175% at the end of 2019, the company said.
Bond price fluctuations have an impact on ratios as European insurers are required to book investments in sovereign debt - such as Italian BTP state bonds - at market value to calculate capital and solvency ratios.
Italy bond prices have fluctuated wildly in recent days, first falling as investors fled riskier assets and then rising after the European Central Bank stepped in with emergency stimulus measures to calm panicked markets.
Cattolica said while it was premature to make forecasts, coronavirus was expected to have a negative impact on premium income but should not lead to a rise in claims.
“Obviously there’s a slump in car accidents these days” due to lockdowns but “we’re cautious on estimates”, Mattioli said.
Cattolica said 2019 net profit fell 29.7% to 75 million euros ($81.6 million) due to some one-off charges.
Net premiums for the year rose about 20% to 7 billion euros, boosted by a buoyant life insurance sector.
Cattolica confirmed a revised 2020 outlook it gave last month which was for its operating profit to be “slightly lower” than the three-year business plan target it presented in 2018. ($1 = 0.9196 euros) (Reporting by Andrea Mandalà; Editing by William Maclean and David Clarke)