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Fitch Affirms Poste Vita at IFS 'BBB'; Outlook Stable
November 23, 2017 / 2:00 PM / in 20 days

Fitch Affirms Poste Vita at IFS 'BBB'; Outlook Stable

(The following statement was released by the rating agency) LONDON, November 23 (Fitch) Fitch Ratings has affirmed Italian insurer Poste Vita S.p.A.'s Insurer Financial Strength (IFS) Rating at 'BBB' (Good) and Long-Term Issuer Default Rating (IDR) at 'BBB'. The Outlooks are Stable. Fitch has also affirmed Poste Vita's dated subordinated notes at 'BBB-'. KEY RATING DRIVERS Poste Vita's IFS rating is constrained by Italy's sovereign rating (BBB/Stable) due to the insurer's large exposure to Italian sovereign debt. To match domestic insurance liabilities, Poste Vita held EUR78 billion of Italian sovereign bonds or around 22x consolidated shareholder's funds, at end-June 2017. Poste Vita's ratings also reflect ownership by Poste Italiane (Poste; BBB/Stable). Fitch regards Poste Vita as being strategically very important to Poste. Poste provides funding in the form of subordinated loans (EUR250 million at end-June 2017) and manages capital at a group level. Fitch views Poste Vita as an important contributor to Poste's profit and believes financial and operational support would be forthcoming if needed. Poste Vita's standalone credit profile is 'BBB+'. This reflects the strong franchise of Poste Vita in Italy, where it is the largest life insurer by premiums, with a market share of 19%, and its strong financial performance. However, Poste Vita's large exposure to Italian sovereign debt weakens the insurer's standalone credit profile. This is reflected in our view of Poste Vita's capitalisation, as measured by Fitch's risk-adjusted Prism factor-based capital model (Prism FBM), and the insurer's asset concentration risk. Poste Vita's Prism FBM score decreased to 'Adequate' in 2016 from 'Strong' in 2015 based on last year financials, driven by an increase in risk capital, as the insurer's life business experiences firm growth. Its consolidated Solvency II ratio, calculated using the standard formula, was 282% at end-3Q17 (end-2016: 294%). However, given the large exposure to Italian sovereign debt, Poste Vita 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. Poste Vita's Fitch-calculated financial leverage ratio (FLR) improved to 23% in 2016 (2015: 27%), as the company redeemed EUR200 million of intra-group subordinated bonds. Fitch expects the FLR to remain stable and supportive of the company's rating. Premium income increased to EUR16.3 billion at end-3Q17 (end-3Q16: EUR15.4 billion). Poste Vita's four-year average return on equity was 11%, which Fitch views as strong and supportive of the company's ratings. We expect Poste Vita will increase its profitability for 2017. Fitch considers Poste Vita's exposure to interest rate risk as low. This reflects an adequate match between assets and liabilities and relatively low minimum guarantees. Around 44% of traditional guaranteed liabilities must contractually return at least 1.5% while the remaining part of the liabilities have guarantees lower than 1.5%. Crediting rates have historically been higher but over 91% of the guarantees only have to be paid at maturity, allowing Poste Vita greater flexibility in dealing with low investment returns in any particular year. RATING SENSITIVITIES Poste Vita's ratings could be downgraded if Italy or Poste are downgraded. Poste Vita's ratings could be upgraded if Italy or Poste are upgraded. A significant deterioration of Poste Vita's capitalisation, as measured by Fitch's Prism Factor Based Model, could also lead to a downgrade. 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 Willem Loots Senior Director +44 20 3530 1808 Media Relations: Stefano Bravi, Milan, Tel: +39 02 879 087 281, Email: stefano.bravi@fitchratings.com; 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. 26 Apr 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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