GENERALI
Fitch Ratings has assigned
The notes are rated two notches below Generali's Issuer Default Rating (IDR) of 'A-' to reflect Fitch's 'below-average' recovery assumption (one notch) and assessment of 'moderate' non-performance risk (one notch), in line with Fitch's notching criteria.
Key Rating Drivers
The subordinated notes have a maturity of 10 years and carry a fixed coupon. Generali has the option to call the notes six months prior to the maturity date. The issue ranks junior to senior notes and pari passu with senior subordinated securities. This level of subordination results in Fitch's 'below-average' baseline recovery assumption for the issue.
The notes include a mandatory interest deferral feature, which would be triggered if the company is not able to meet the applicable solvency capital requirement. Under the agency's criteria, Fitch regards this feature as leading to 'moderate' non-performance risk.
The notes qualify as Tier 2 regulatory capital under Solvency II and are therefore treated as 100% capital in Fitch's Prism Factor-Based Model (FBM). However, given that it is a dated instrument the notes are treated as 100% debt in Fitch's financial leverage ratio (FLR) calculation.
Generali's FLR was 26% at end-2021, unchanged from end-2020's. Fitch expects Generali's FLR (adjusted for today's notes) to slightly weaken to 27%, but to subsequently reduce to 25% by end-2022 once the
The issue will marginally extend Generali's maturity profile and reflects the insurer's strong financial flexibility.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Maintenance of a 'Very Strong' Prism FBM score and a FLR below 30% with no increases in sovereign investment concentration from current levels
Sovereign investment concentration at below 1.5x consolidated shareholders' capital
An upgrade of
Factors that could, individually or collectively, lead to negative rating action/downgrade:
The Outlook could be revised to Stable if Generali's sovereign exposure rises above 2.0x consolidated shareholders' capital
A downgrade of
A decrease of Generali's Prism FBM score to below 'Very Strong' for a sustained period or an increase in the FLR to more than 35%
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Date of Relevant Committee
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
RATING ACTIONS
Entity / Debt
Rating
subordinated
LT
BBB
New Rating
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