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I AGREE
Rating Action:

Moody's places Allianz S.p.A on review for downgrade and maintains a stable outlook on Assicurazioni Generali S.p.A.

30 May 2018

London, 30 May 2018 -- Moody's Investors Service has today placed Allianz S.p.A on review for downgrade following the review for downgrade on the Italian government's Baa2 debt rating. At the same time Moody's has affirmed the Baa1 insurance financial strength rating (IFSR) of Assicurazioni Generali S.p.A and Generali Italia S.p.A the outlook on which remains stable.

A complete list of ratings affected by this rating action is available at the end of this press release. For further information on the sovereign rating action, please refer to Moody's press release dated 25 May 2018 (https://www.moodys.com/research/--PR_384025) and to Moody's issuer comment dated 29 May 2018 (https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1127479).

Moody's considers that the above insurance companies' key credit fundamentals (asset quality, capitalisation, profitability and financial flexibility) are partly correlated with -- and thus linked to -- the economic and market conditions in Italy, where they are domiciled and have significant operations.

Moody's also notes that the IFSRs of both Allianz S.p.A and Assicurazioni Generali S.p.A. are above the sovereign rating, reflecting in the former the benefits of ownership from a strong parent (Allianz SE, Aa3 IFSR, stable) and, in the latter, the significant geographical diversification of the Generali group.

RATINGS RATIONALE

--- ALLIANZ S.P.A.: IFSR placed on review for Downgrade

The placing of the A3 IFSR of Allianz S.p.A. (Allianz Italy) on review for downgrade reflects the insurer's direct exposure to Italian sovereign risk in terms of both investment portfolio and business profile. As at year-end 2016, Italian government bonds represented around 35% (EUR15 billion) of Allianz Italy's total investment portfolio and approx. 3.0x of its shareholders' equity. In addition, Allianz Italy sources virtually all its premiums from Italy.

Nonetheless, Moody's rates Allianz Italy two notches above the Italian sovereign rating, reflecting the benefit of potential parental support. Allianz Italy is 100% owned by Allianz SE, which is rated Aa3 IFSR with a stable outlook. With the exception of Germany, Italy was the country generating the largest amount of gross premium written for Allianz SE in 2017, and Allianz Italy has consistently been one of the Allianz group's largest contributors in terms of operating profits. As a consequence, Moody's believes that Allianz SE would very likely provide support to its Italian operations in case of need.

--- ASSICURAZIONI GENERALI S.P.A: Baa1 IFSR affirmed; stable outlook

The affirmation of Assicurazioni Generali S.p.A's IFSR and the stable outlook primarily reflects the Generali group's diversification outside Italy. Assicurazioni Generali S.p.A acts both as an operating insurance company and a holding company for the Generali group.

In 2017 Generali's non-Italian business accounted for 67% of the group's premiums and 62% of the group's operating results, providing significant geographic diversification outside Italy for the group. The rating agency says that Generali's non-Italian operations, notably the German and the French operations, which accounted for 23% and 17% of the group's gross written premiums respectively in 2017, have very limited direct exposure to Italy and, therefore, their stand-alone credit profile is not affected by the review for downgrade on the Italian sovereign. The strong geographic diversification provided by these operations outside Italy largely contributes to the stable outlook of Generali group in spite of the review for downgrade on the Italian sovereign.

Generali has been improving its resilience to a hypothetical scenario of stress on Italian assets in recent years, thanks to (1) a decrease in the exposure to Italian government bonds, both on an absolute nominal value basis and as a proportion of its investments, (2) a change in the business mix in life insurance with an increased weight of unit-linked policies (unit- and index-linked represented 22.2% of the life gross premiums written in Italy in 2017 vs 17% in 2015) and (3) an improvement in capitalisation.

Nonetheless, according to Moody's, Assicurazioni Generali S.p.A is significantly exposed to the Italian sovereign risk, notably through its Italian subsidiary Generali Italia S.p.A. As at year-end 2017, Italian government bonds represented 16% of Generali group's total investment portfolio (excluding unit-linked assets) and about 245% of the group's shareholders' equity. In addition, the group sourced 33% of its gross written premiums in Italy in 2017. As a result, Moody's maintains a limited notching differential between Assicurazioni Generali S.p.A's IFSR and the Italian sovereign rating, which is currently one notch and will likely not exceed two notches.

Moody's has also affirmed the Baa1 IFSR of Generali Italia S.p.A. the outlook on which remains stable, reflecting the stable outlook on Assicurazioni Generali S.p.A. Moody's mentions that Generali Italia S.p.A.'s rating benefits from implicit support from Assicurazioni Generali S.p.A. Moody's adds that, conversely, the Baa1 IFSRs of Generali's French subsidiaries and the A3 IFSRs of Generali's German subsidiaries are lower than their intrinsic stand-alone financial strength, reflecting the contagion risk from the rest of the group in case of a potential stress on the Italian sovereign and Moody's expectation that resources from these subsidiaries would be used to support the Italian operations.

WHAT COULD MOVE THE RATINGS UP/DOWN

--- ALLIANZ S.P.A.

Given the company is under review for downgrade, upwards rating pressure is currently limited. Nonetheless, Moody's would likely stabilise Allianz Italy's outlook if the outlook on Italy was stabilised and/or we ascertain a stronger level of explicit /implicit support from its parent company.

Downwards pressure on Allianz Italy's rating could develop following (i) a deterioration in the credit quality of the Italian sovereign, (ii) a change in the strategic importance of the company within the Allianz group or (iii) a material deterioration in company earnings, operating performance or capitalisation levels.

--- ASSICURAZIONI GENERALI S.P.A

Given the review for downgrade on Italy, upwards rating pressure is currently limited. Nonetheless, upwards pressure could develop on Generali's ratings in case of (i) an improvement in the credit quality of Italy, as evidenced by an upgrade of Italy's sovereign rating, and (ii) a continued improvement of the group's solvency and a reduction in exposure to Italian assets.

Conversely, downwards pressure could develop in case of (i) a deterioration in the credit quality of Italy, particularly in case of a more than one notch downgrade of Italy's sovereign rating, (ii) a material deterioration of solvency or a significantly higher exposure to Italian assets, (iii) a deterioration in operating performance also resulting in a deterioration in the group's financial flexibility, or (iv) a deterioration in the cash flows at the holding, for example with a significant reduction in the cash flow coverage (available cash flows over holding interests and expenses) below 2x.

A deterioration in the stand-alone credit quality of Generali's French or German operations would also place downwards pressure on Assicurazioni Generali S.p.A and Generali Italia S.p.A.'s ratings.

LIST OF AFFECTED RATINGS

Issuer: Allianz S.p.A.

..Placed on Review for Downgrade:

....Insurance Financial Strength, currently A3

..Outlook Actions:

....Outlook changed to Rating under Review from Negative

Issuer: Assicurazioni Generali S.p.A

..Affirmations:

....Insurance Financial Strength, affirmed Baa1

....Senior Unsecured Regular Bond/Debenture, affirmed Baa2

....Senior Unsecured Medium-Term Note Program, affirmed (P)Baa2

....Senior Subordinate Medium-Term Note Program, affirmed (P)Baa3

....Senior Subordinated Regular Bond/Debenture, affirmed Baa3(hyb)

....Senior Subordinated Regular Bond/Debenture, affirmed Baa3

....Junior Subordinate Medium-Term Note Program, affirmed (P)Ba1

....Preferred Stock, affirmed Ba1(hyb)

..Outlook Action:

....Outlook remains Stable

Issuer: Generali Finance B.V.

..Affirmations:

....Backed Senior Unsecured Medium-Term Note Program, affirmed (P)Baa2

....Backed Senior Subordinate Medium-Term Note Program, affirmed (P)Baa3

....Backed Junior Subordinated Regular Bond/Debenture, affirmed Ba1(hyb)

....Backed Junior Subordinate Medium-Term Note Program, affirmed (P)Ba1

..Outlook Action:

....Outlook remains Stable

Issuer: Generali Italia S.p.A.

..Affirmation:

....Insurance Financial Strength, affirmed Baa1

..Outlook Action:

....Outlook remains Stable

PRINCIPAL METHODOLOGIES

The methodologies used in these ratings were Life Insurers published in May 2018, and Property and Casualty Insurers published in May 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead rating analyst and the Moody's legal entity that has issued the ratings.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Dominic Simpson
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Antonello Aquino
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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