Generali Espana gets 'AA-' rating

Fitch considers Generali Espana as core to its ultimate parent company Assicurazioni Generali SpA and the agency has, therefore, aligned Generali Espana's IFS rating with that of other core operating entities within the Generali Group. This action follows the application of Fitch's insurance group rating methodology.

To a lesser extent, the rating also reflects Generali Espana's strong underwriting performance, prudent investment profile and healthy regulatory capitalisation.

Fitch's view that Generali Espana is core to Generali is based on a number of factors. Generali Espana was created in June 2010, through the merger between La Estrella and Banco Vitalicio, the two former main operating entities of Generali in Spain. The aim of the merger was to generate additional cost savings and trade business under one single platform and the same brand of the group in the Spanish insurance market.

In addition, Spain is the fourth-largest country for the Generali Group in terms of gross written premiums, although the scale of business trails Italy, Germany and France, the main markets for Generali, by a significant margin.

With non-life GWP of E1.4bn or 6% of group total, the contribution of Generali Espana is particularly important in the property and casualty business, while the market presence in life (E900m) is more limited.

The reported combined ratio for the Spanish region was 98.1% in 2010, marginally better than the consolidated figure for the Generali group (98.8%), but deteriorating from 94.6% in 2009.

On a standalone basis, Generali Espana displayed a strong regulatory solvency ratio at 221% in 2010 and Fitch's own analysis of the company capital adequacy ratio indicates that the capital position of the company weakened only as a result of the higher dividend payout to its parent company, Generali.

Generali Espana's rating would most likely be downgraded if the rating of its parent company Generali is downgraded and could be downgraded if Generali Espana is no longer viewed as a core entity within the Generali Group. A material deterioration of the company's standalone position, leading to a depleted capital position, weaker underwriting profit and a reduced contribution to Generali's earnings and premiums, could also trigger a downgrade.

Conversely, the rating could be upgraded if the rating of Generali is upgraded and Generali Espana retains its core status.

With GWP of E1.4bn, Generali Espana is the sixth largest non-life insurer in Spain. It also holds a market presence in life, where Generali Espana represents the tenth-largest insurer (GWP E900m). Total assets of the newly created company were E11.8bn at end-2010.