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Fitch Affirms Intesa Sanpaolo Vita's IFS at 'BBB+'; Outlook Stable
October 7, 2016 / 2:22 PM / a year ago

Fitch Affirms Intesa Sanpaolo Vita's IFS at 'BBB+'; Outlook Stable

(The following statement was released by the rating agency) LONDON, October 07 (Fitch) Fitch Ratings has affirmed Intesa Sanpaolo Vita's (ISV) Insurer Financial Strength (IFS) rating at 'BBB+'. Fitch has also affirmed ISV's Long-Term Issuer Default Rating (IDR) at 'BBB+'. The Outlooks are Stable. Fitch has also affirmed ISV's dated subordinated notes and perpetual subordinated at 'BBB' and 'BBB-', respectively. KEY RATING DRIVERS The ratings take account of ISV's strong franchise in Italy, where it is the second-largest life insurer by premiums, with a market share of 13%. ISV is significantly exposed to Italian sovereign debt and this heavily influences its ratings, a feature that is reflected in our view of its capitalisation, based on Fitch's risk-adjusted Prism factor-based capital model (Prism FBM). ISV's large exposure to Italian sovereign debt constrains its IFS rating to Italy's sovereign IDR (BBB+/Stable). ISV's unconstrained IFS rating is 'A-' and its unconstrained IDR is 'BBB+'. If Italy was upgraded, it is unlikely that ISV's IDR would be higher than the IDR of its ultimate parent, Intesa Sanpaolo (ISP; BBB+/Stable). To match domestic liabilities, ISV held EUR50bn of Italian sovereign bonds or around 10x consolidated shareholders' funds, excluding Fideuram Vita (FV), at end-June 2016. ISV's Prism FBM score is 'Adequate' based on year-end 2015 results. Its consolidated Solvency II ratio, calculated using the standard formula, was above 180% at end-1H16. However, given the large exposure to Italian sovereign debt, ISV could face a significant increase in regulatory capital charges if European authorities remove the zero risk-weighting for European sovereigns. Prism FBM already includes a capital charge for sovereign assets. ISV's ultimate parent, ISP, is the second-largest Italian bank by total assets. ISV is highly integrated in ISP. The bank manages capital and risks at group level, including for ISV. As part of ISP's wealth management operations, ISV distributes its insurance products through ISP branches. Fitch views ISV as an important contributor to ISP's financial performance. ISV is rated on a standalone basis and its ratings do not benefit from ISP's ownership. ISV's Fitch-calculated financial leverage ratio (FLR) was moderate at 24% in 2015, in line with 2014. Fitch expects the FLR to be commensurate with the company's rating in 2016. ISV's total financing and commitments (TFC) ratio is low given the traditional nature of its business. Total net earned premiums, excluding FV, fell by 19% yoy at June-2016 to EUR4.8bn, after the company suspended sales of life traditional savings products in favour of unit-linked and hybrid products. This volatility is also linked to the volatile nature of bancassurance business in Italy. Net income decreased by 3% yoy at June-2016, to EUR367m, mainly due to lower premium income and investment returns and EUR50m of extraordinary gains in 1H15. We expect ISV to maintain a similar level of profitability for full-year 2016. ISV is well insulated from low interest rates as the durations of its assets and liabilities are well matched. The reduction in minimum guarantees offered on new business (0% for the newest products), is reducing the proportion of the in-force life reserves that carry financial guarantees. Furthermore, new guarantees apply only at maturity, rather than accruing year by year, allowing ISV greater flexibility in dealing with low investment returns in any particular year. RATING SENSITIVITIES ISV's ratings could be downgraded if Italy is downgraded or ISP's ratings are downgraded. Conversely, ISV's ratings could be upgraded if Italy is upgraded and ISP's ratings are upgraded. Contact: Primary Analyst Federico Faccio Senior Director +44 20 3530 1394 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Nicola Caverzan Associate Director +44 20 3530 1642 Committee Chairperson David Prowse Senior Director +44 20 3530 1250 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 15 Sep 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1012810 Solicitation Status here Endorsement Policy here ail=31 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 WEB SITE AT WWW.FITCHRATINGS.COM. 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