Best Downgrades Generali, Main Subs Ratings; Keeps on Review/Negative

As a result of the continued negative developments regarding the euro zone sovereign debt crisis, A.M. Best Europe – Rating Services Limited has downgraded the financial strength rating (FSR) to ‘A’ (Excellent) from ‘A+’ (Superior) and issuer credit rating (ICR) to “a” from “aa-“of Italy’s Assicurazioni Generali S.p.A. and its main subsidiaries. All of the ratings remain under review with negative implications.

As with other European insurers, Best explained that it has taken the actions in light of “Generali’s exposure to investments in several peripheral euro zone economies, Italy in particular.”

Best’s rating actions on Generali and other European (re)insurers “reflect their exposure to the continued deterioration of the sovereign creditworthiness of several euro zone countries and the negative economic outlook for the region,” said the bulletin.

As with other insurers, Best noted that it has “been actively monitoring this crisis and released reports on related (re)insurers’ exposure in September and November of this year. The rationale for taking rating action at this point is largely attributable to the current level of credit and liquidity risk for insurers operating within the euro zone countries—most notably Italy and Spain. The perceived strain on the economies of these countries and companies operating within their borders is growing rapidly with very little evidence of a solution being formulated to address near-term concerns.”

In addition Best said the ratings for Generali and its concerned subsidiaries would remain under review with negative implications while it “examines these companies’ exposure to a prolonged adverse economic environment within the euro zone.”

As Best also explained concerning Spain’s MAPFRE, it is particularly concerned by the “exposure to Italy and Spain’s sovereign bonds and the potential for contagion into other asset classes, particularly holdings of European bank securities.”

Best said it “will assess the likely impact of a prolonged financial crisis and recessionary environment on these carriers’ market position and ongoing business operations; however, “upward rating pressures are unlikely at this point.

“Negative rating actions could occur if there were a worsening of risk-adjusted capitalization tied to investment losses or a deterioration of the operating environment in key territories.”

The FSR has been downgraded to ‘A’ (Excellent) from ‘A+’ (Superior) and the ICR to “a” from “aa-” and remain under review with negative implications for Assicurazioni Generali S.p.A. and its following subsidiaries:
Generali Deutschland Holding AG
AachenMünchener Lebensversicherung AG
AachenMünchener Versicherung AG
Generali Lebensversicherung AG
Generali Versicherung AG
COSMOS Lebensversicherungs-AG
COSMOS Versicherung Aktiengesellschaft
Central Krankenversicherung Aktiengesellschaft
Generali Vie
Generali IARD

The ICR has been downgraded to “bbb” from “a-” and remains under review with negative implications for Generali France S.A.

The following debt ratings have also been downgraded and remain under review with negative implications:
Assicurazioni Generali S.p.A.—
— to “a-” from “a+” on €1.75 billion [$2.274 billion] 5.125 percent senior unsecured notes, due 2024
— to “a-” from “a+” on €750 million [$975 million] 4.875 percent senior unsecured notes, due 2014
— to “bbb+” from “a” on €750 million [$975 million] 6.9 percent fixed/floating rate subordinated callable debentures, due 2022 (callable in 2012)
— to “bbb+” from “a” on £495 million [$768 million] 6.416 percent fixed/floating subordinated rate perpetual debentures, callable in 2022
— to “bbb+” from “a” on £350 million [$543 million] 6.269 percent fixed/floating subordinated rate perpetual debentures, callable in 2026

Generali Finance B.V. (guaranteed by Assicurazioni Generali S.p.A.) —
— to “a-” from “a+” on €1.5 billion [$1.95 billion] 4.75 percent senior unsecured debentures, due 2014
— to “a-” from “a+” on €500 million [$650 million] 3.875 percent senior unsecured notes, due 2015
— to “bbb+” from “a” on €1.25 billion [$1.625 billion] 5.479 percent fixed/floating subordinated rate perpetual debentures, callable in 2017
— to “bbb+” from “a” on €1.275 billion [$1.658 billion]n 5.317 percent fixed/floating subordinated rate perpetual debentures, callable in 2016
— to “bbb+” from “a” on £700 million [$1.086 billion] 6.214 percent fixed/floating subordinated rate perpetual debentures, callable in 2016

The following indicative ratings on securities available under the €7.0 billion [$9.1 billion] medium-term note program have been downgraded and remain under review with negative implications:
Assicurazioni Generali S.p.A. and Generali Finance B.V.—
— to “a-” from “a+” on all senior notes to be issued under the
program
— to “bbb+” from “a” on all subordinated and hybrid notes to be issued under the program

Source: A.M. Best