Moody’s Ratings has revised the outlook on Assicurazioni Generali S.p.A. (Generali) to positive from stable and affirmed its A3 Insurance Financial Strength Rating (IFSR).
The outlooks on Generali’s main operating insurance subsidiaries in Italy, France, and Germany were also revised to positive from stable.
Moody’s said the revision follows its recent upgrade of the outlook on the Government of Italy (Baa3) to positive from stable.
However, the rating agency noted that Generali’s ratings are partly constrained by the Italian sovereign rating, given the group’s operating and asset exposure to Italy.
As Generali is domiciled in Italy and primarily issues debt through its Italian holding company, its financial flexibility is also influenced by the sovereign’s credit quality. Therefore, any improvement in the Italian sovereign credit rating has a positive impact on Generali’s.
Moody’s said the affirmation of the A3 IFSR reflects Generali’s very strong business profile, supported by leading positions in its core European markets, diversification across business lines, and relatively low product risk, as well as its strong financial profile—despite exposure to Italian sovereign risk.
The rating agency continues to align the IFSRs of Generali’s subsidiaries in Italy, France, and Germany with the group’s IFSR, reflecting the view that the business and financial profiles of these entities both contribute to and benefit from the group’s overall financial strength. The positive outlooks on these subsidiaries mirror that of the parent company.
Moody’s cited several factors that could lead to an upgrade: an improvement in Italy’s credit quality (reflected in a sovereign rating upgrade), continued strong earnings, and the maintenance of a Solvency II ratio firmly above 200%, with low sensitivity to adverse financial market movements.
Conversely, a downgrade could result from a deterioration of Italy’s sovereign rating to non-investment grade, or a significant weakening in the credit quality of the French or German sovereigns, a prolonged deterioration in Generali’s operating performance and capitalisation, or reduced cohesion of the group, as evidenced by weakened internal support mechanisms or a diminished ability of the Italian operations to benefit from the strengths of other group operations.
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