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Fitch Maintains Stable Outlooks for Italian Insurance Market
December 17, 2014 / 3:02 PM / 3 years ago

Fitch Maintains Stable Outlooks for Italian Insurance Market

(The following statement was released by the rating agency) LONDON, December 17 (Fitch) Fitch Ratings says that its rating and sector outlooks for the Italian insurance market remain stable, reflecting Fitch's expectations that insurers' profit and capital adequacy will be resilient amid challenging operating conditions in Italy. This is despite softening prices in the dominant motor business and high concentration risk in life insurers' investment portfolios. Italian insurers hold significant amounts of government and corporate debt in their investment portfolios, largely backing insurance liabilities. This, compounded with their exposure to the domestic economy, makes their ratings strongly linked to the Italian sovereign. Any change to Italy's rating or Outlook (BBB+/Stable) could trigger a change in insurers' ratings or Outlooks. Non-life underwriting performance is expected to remain relatively strong in 2015 despite falling premium income as insurers continue to benefit from benign claims frequency. Nonetheless, Fitch believes that non-life profitability will be weaker compared with 2014's strong levels, as pricing conditions continue to soften amid stiff competition between insurers. The increasing shift to price aggregators could put further pressure on pricing. Fitch also expects claims costs to moderately increase. However, these negative effects are likely to be partially offset by relatively stable claims frequency in 2015, as motor claims frequency in particular tends to be dampened in a recession. Life premiums are rising, which together with rising values of Italian bonds, is boosting net profitability. Sales are driven by single premiums, which can be volatile, but Fitch expects an upward trend in regular premiums in the low single digits in 2015, and positive net inflows. The agency expects lapse rates to remain stable, provided there are no financial market shocks. Italian insurers' life earnings are sensitive to the effects of changes in interest rates and credit spreads on their traditional with-profits business, known as segregated accounts. Fitch expects interest rate risk to slowly decline, reflecting the lower guarantees on new business and the running-down of older business with higher guarantees. In addition, the assets backing the life business carry unrealised gains, due to spread tightening on Italian government bonds. Credit risk remains largely dependent on the credit quality of the Italian sovereign. The stable rating outlook reflects the mix of Outlooks on individual rated companies. The sector outlook is Fitch's view of the fundamentals of the Italian insurance market as a whole rather than for the ratings of the insurers that Fitch rates. Contacts: Federico Faccio Senior Director +44 20 3530 1394 Fitch Ratings Limited 30 North Colonnade London E14 5GN Clara Hughes Senior Director +44 20 3530 1249 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: Additional information is available at ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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