TEXT-S&P rates Assicurazioni Generali notes 'BBB+/Watch Neg'

Wed Dec 5, 2012 2:07pm EST

Dec 5 - Standard & Poor's Ratings Services said today that it has assigned
its 'BBB+' long-term issue rating to the 30-year subordinated notes of
Italy-based global multiline insurer Assicurazioni Generali SpA 
(Generali; A/Watch Neg/--). The notes are on CreditWatch negative, reflecting
the CreditWatch status of the issuer's counterparty credit ratings (see
"Research Update: Ratings On Generali And Subs Kept On CreditWatch Negative On
Persisting Strategic And Capital 
Uncertainties," published Nov. 13, 2012). The rating is subject to our review 
of the final terms and conditions.

The rating incorporates our methodology for subordinated debt issues: We have 
rated the notes two notches below the long-term counterparty credit rating on 
the issuer, Generali. 

The rating is based on our understanding that the holders of the notes will be 
subordinated to Generali's senior creditors, and that Generali has the option 
of deferring interest if, during the previous six-month period (or three 
months for instruments that pay quarterly): 
     -- No dividend or other distribution has been declared, made, approved, 
or set aside for payment in respect of any securities of Assicurazioni 
Generali that rank equally or are junior to the new securities, unless such a 
declaration or distribution was deemed mandatory; and
     -- Neither Assicurazioni Generali nor any of its subsidiaries has 
redeemed, repurchased, or acquired any securities of Assicurazioni Generali 
that rank equally or are junior to the new securities (other than a Permitted 
Repurchase) unless redemption, repurchase, or acquisition was made below par 
value. 

Furthermore, we note that interest deferral is mandatory if a solvency event 
has occurred.

Generali can call the notes in December 2022 and subsequently at each 
quarterly interest payment date thereafter, subject to the conditions of 
repayment, including approval from the Italian insurance regulator. The coupon 
is expected to be fixed until the call date, after which time it will convert 
to floating rate. We understand that a step-up of 100 basis points at maximum 
would be applied to the fixed rate spread. 

We expect to classify the notes as having "intermediate equity content" under 
our hybrid capital criteria. We include securities of this nature, up to a 
maximum of 25%, in our calculation of total adjusted capital, which forms the 
basis of our consolidated risk-based capital analysis of insurance companies. 
Inclusion is subject to the bonds being considered eligible for regulatory 
solvency treatment and the aggregate amount of included hybrid capital not 
exceeding the total eligible for regulatory solvency treatment.

We understand that Generali plans to use the proceeds from the bonds to 
strengthen its capital position, benefiting from improved market conditions, 
ahead of its future funding needs. Including this transaction, we estimate 
that the wider group's financial leverage (debt plus hybrid capital, divided 
by the sum of economic capital available, debt, and hybrid capital) will 
remain below but close to 30%. We continue to forecast that the fixed-charge 
coverage (EBITDA divided by senior and subordinated debt interest) for 
full-year 2012 and 2013 will significantly rebound to around 5x from the weak 
4x level of 2011, taking into account the significant rebound in net profit in 
the year to date. 


RELATED RESEARCH AND CRITERIA

     -- Clarification On Hybrid Capital Step-Ups, Call Options, And 
Replacement Provisions, Oct. 22, 2012
     -- Hybrid Capital Issue Features: Update On Dividend Stoppers, 
Look-Backs, And Pushers, Feb. 10, 2010
     -- Assumptions: Clarification Of The Equity Content Categories Used For 
Bank And Insurance Hybrid Instruments With Restricted Ability To Defer 
Payments, Feb. 9, 2010
     -- Hybrid Capital Handbook: September 2008 Edition, Sept. 15, 2008
     -- Research Update: Ratings On Generali And Subs Kept On CreditWatch 
Negative On Persisting Strategic And Capital Uncertainties, Nov. 13, 2012


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