TEXT-S&P may still change Fondiaria-SAI Spa ratings

Overview
-- On April 26, 2012, the Italian Antitrust Authority suspended
Fondiaria-SAI group's (Fondiaria-Sai, core operating entities rated B/Watch
Dev) merger and integration plans with Unipol group (Unipol, core operating
entities rated BBB+/Watch Neg). This was in order to investigate the potential
damage to competition that could result from the merger.
-- We believe that the execution of the merger plans is uncertain as a
result of the antitrust action. The merger is also still subject to
shareholder approval, and is pending the execution of two rights issues of
EUR1.1 billion each by Fondiaria-SAI Spa, Fondiaria-SAI group's major operating
entity, and Unipol Gruppo Finanziario Spa (UGF, BBB-/Watch Neg), Unipol
group's holding company.
-- We are therefore maintaining our CreditWatch with developing
implications on the 'B' long-term ratings on Fondiaria-SAI Spa, its "core"
subsidiary Milano Assicurazioni Spa, and its "nonstrategically important"
subsidiary SIAT-Societa Italiana Assicurazioni e Riassicurazioni pa.
-- The CreditWatch with developing implications reflects our view that if
the merger and integration plans are executed, it would transform
Fondiaria-SAI's financial risk profile by materially strengthening it. If the
plans do not go ahead, however, we believe the insurer would be exposed to an
increasing risk of regulatory intervention.
Rating Action
On May 3, 2012, Standard & Poor's Ratings Services maintained its CreditWatch
with developing implications on the 'B' long-term counterparty credit and
financial strength ratings on Italy-based composite insurer Fondiaria-SAI Spa,
its core subsidiary Milano Assicurazioni Spa, and its
"nonstrategically important" subsidiary SIAT-Societa Italiana Assicurazioni e
Riassicurazioni pa (SIAT). The ratings were initially placed on CreditWatch
developing on Dec.
29, 2011.
Rationale
We are maintaining the CreditWatch developing because the merger is still
subject to shareholder and regulatory approvals, and the relevant capital
issues have not yet been executed. In our opinion, the suspension required by
the Italian Antitrust Authority further increases the risk of regulatory
intervention if the merger and integration plans do not go ahead.

We understand the merger and integration plan between Fondiaria-SAI group and
Unipol group contemplates three major steps: 1) a capital issue of EUR400
million by Premafin HP dedicated to UGF; 2) two capital issues of EUR1.1 billion
each by Fondiaria-SAI Spa and UGF; and 3) the merger of Unipol Assicurazioni
Spa (BBB+/Watch Neg/--), Fondiaria-SAI Spa, Milano Assicurazioni Spa, and
Premafin HP (Fondiaria-SAI Spa's holding company).

We think it would be very difficult for Fondiaria-SAI to raise capital other
than through this integration plan. The EUR1.1 billion capital issue alone would
allow Fondiaria-SAI group to restore its level of capital above the minimum
regulatory requirement. However, according to Standard & Poor's capital model,
even taking into account the EUR1.1 billion capital increase, Fondiaria-SAI
would continue to show a material capital deficiency at the 'BBB' level, while
its financial flexibility would remain significantly impaired.

We believe the merger and integration plan would transform Fondiaria-SAI
group's current weak capital adequacy and financial flexibility, which would
be materially strengthened. However, in our opinion there would be little
capacity for the new group to absorb potential extraordinary costs resulting
from a sizable and challenging integration in a difficult macroeconomic and
financial environment.

CreditWatch
Standard & Poor's aims to resolve or update the CreditWatch placement within
the next three months based on regulatory and shareholder developments.

We could raise the ratings up to the 'BBB' range if the merger and integration
plan is executed as planned.

Conversely, we could lower the ratings if the plan is not executed as this
would increase the risk of regulatory intervention.

Related Criteria And Research
All articles listed below are available on RatingsDirect on the Global Credit
Portal, unless otherwise stated.
-- Principles Of Credit Ratings, Feb. 16, 2011
-- Refined Methodology And Assumptions For Analyzing Insurer Capital
Adequacy Using The Risk-Based Insurance Capital Model, June 7, 2010
-- Use Of CreditWatch And Outlooks, Sept. 14, 2009
-- Interactive Ratings Methodology, April 22, 2009
-- Group Methodology, April 22, 2009
-- Hybrid Capital Handbook: September 2008 Edition, Sept. 15, 2008
-- Italian Insurer Fondiaria-SAI And Subs 'B' Ratings Kept On Watch
Developing On Unipol Deal And Estimated Higher Losses, Feb. 2, 2012
Ratings List
Ratings Affirmed

Fondiaria-SAI SpA
SIAT - Societa Italiana Assicurazioni e Riassicurazioni pA
Milano Assicurazioni SpA
Counterparty Credit Rating
Local Currency B/Watch Dev/--
Financial Strength Rating
Local Currency B/Watch Dev/--