(The following statement was released by the rating agency)
LONDON, August 05 (Fitch) Fitch Ratings has affirmed Italian
Reale Mutua di Assicurazioni's (RMA) and its Spanish subsidiary
Generales' (Reale Seguros) Insurer Financial Strength (IFS)
ratings at 'BBB+'.
The Outlooks are Stable.
KEY RATING DRIVERS
The ratings reflect RMA group's strong capitalisation, absence
leverage and strong franchise in Italy. This is offset by RMA's
concentration in Italian sovereign debt. As a result, RMA's
ratings are capped
by the rating of Italy (BBB+/Stable).
The affirmation also reflects the group's improved underwriting
2013, with a non-life combined ratio of 92.7%, and prudent
Fitch expects that RMA will maintain profitable underwriting
softening motor rates in Italy and that its Spanish insurance
continue providing a positive contribution to the group's
earnings and show
resilience to challenging market conditions in Spain.
Fitch considers RMA's regulatory solvency to be strong and
better than most
Italian and European peers, despite concentration risk stemming
from its Italian
and Spanish debt holdings. RMA's consolidated regulatory
solvency ratio was 219%
at end-2013, the highest level since 2008.
Fitch assesses RMA's investment policy as prudent and
investments are well
diversified across industries. Concentration risk in single
corporate issuers is
limited. RMA's exposure to risky assets, as measured by the
ratio, is low, with equity investments significantly below
levels, which Fitch views positively.
However, as RMA is a domestic Italian insurer, its rating is
affected by the
group's exposure to eurozone debt through its holding of Italian
(around EUR4.2bn at end-2013, or 2.1x consolidated shareholders'
funds). This is
to match local liabilities and to achieve satisfactory yields to
guarantees and minimise the risk of policyholder lapses. The
associated with Italian debt holdings is therefore key to RMA's
rating and RMA's
rating is capped by Italy's sovereign rating.
RMA's real estate portfolio, comprising properties in prime
locations in Italy
and Spain and representing 10% of the insurer's consolidated own
assets, is of
good quality, in Fitch's view. The rental values are strong but
there is the
risk that the return offered from, and the liquidity of, these
suffer, should macroeconomic conditions in Italy or Spain
impaired EUR10m in 2013, largely on the Italian portfolio, but
related to properties currently under redevelopment. There were
EUR560m unrealised gains on both properties for the company's
own use and real
RMA's consolidated non-life combined ratio was 92.7% in 2013,
better than 100.2% in 2012, when the ratio was negatively
affected by natural
catastrophes. Excluding the effect of natural catastrophes, the
ratio was a
strong 93.5% in 2012. RMA's consolidated pre-tax profit was
EUR163m in 2013,
marking the fourth consecutive year of profit since a loss of
EUR8m in 2009.
Fitch views RMA and Reale Seguros' non-life reserve adequacy as
consolidated ratio of technical reserves to premiums was 160% at
highest level in seven years. Positively, prior-year reserves
Fitch views RMA's diversification into the Spanish market
through fully owned
subsidiary Reale Seguros positively. Reale Seguros has returned
operating profits since 2005. Spain is a key territory for RMA
believes that RMA would provide support to Reale Seguros if
needed. As a result,
Fitch views Reale Seguros as a "core" entity of RMA under its
rating methodology and the company's rating is based on the
credit profile of
the RMA group as a whole.
RMA's ratings are capped by the ratings of Italy. An upgrade of
Italy would lead
to an upgrade of RMA, provided that net profitability and strong
A downgrade of Italy could lead to a downgrade of RMA. The
ratings could also be
downgraded if the group's combined ratio deteriorates to above
105% or its
consolidated regulatory solvency ratio falls below 150%.
+44 20 3530 1394
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London E14 5GN
+44 20 3530 1249
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Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153,
Additional information is available at www.fitchratings.com.
Applicable criteria, 'Insurance Rating Methodology', dated 13
November 2013, are
available at www.fitchratings.com.
Applicable Criteria and Related Research:
Insurance Rating Methodology
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