UPDATE 2-Moody's may downgrade Generali after reorganisation

Tue Dec 18, 2012 3:39pm EST

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(Adds insurance financial strength rating)

MILAN Dec 18 (Reuters) - Moody's Investors Service may cut Generali's ratings after Italy's biggest insurer said it would regroup all of its domestic operations into a new company.

The U.S. rating agency on Tuesday placed the Baa2 senior debt rating, the Baa3 subordinated debt rating and the Ba1 preferred stock debt ratings of the insurer on review for downgrade.

The Baa1 insurance financial strength rating at Assicurazioni Generali SpA is unaffected by the announcement, Moody's said.

On Friday, Generali said it will invest around 300 million euros ($396.39 million) in the next three years on streamlining operations and improving profitability in its home turf, part of a revamp under new CEO Mario Greco.

Under the reorganisation, a new company, Assicurazioni Generali Italia, will be the primary insurer in the Italian market while Assicurazioni Generali SpA will become more of a pure holding company, according to Moody's.

Since the holding will no longer act as a primary insurer, the scope of the cashflows directly available to its creditors is likely to decrease and its largely liquid base of diversified assets replaced by a more concentrated, and less liquid, investment, Moody's said.

The Bank of Italy, which is the second biggest shareholder in Generali, is set to sell its 4.5 percent stake in the insurer to avoid a possible conflict of interest when it becomes Italy's insurance regulator at the beginning of next year.

A source close to the Bank of Italy said the central bank will announce details of the sale on Wednesday.

Several Italian newspapers said on Tuesday the bank will sell its stake to the state-backed investment fund FSI which in turn could offload all or part of the stake within two or three years. ($1 = 0.7568 euros) (Reporting by Francesca Landini; Editing by Louise Heavens and Diane Craft)

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