Fitch Ratings has affirmed Italian insurer Intesa Sanpaolo Vita S.p.A.'s (ISV) Insurer Financial Strength (IFS) Rating at 'BBB' (Good) and Long-Term Issuer Default Rating (IDR) at 'BBB-'.

The Outlooks are Stable.

Key Rating Drivers

The ratings of ISV reflect the ownership of Intesa Sanpaolo S.p.A. (ISP; IDR: BBB-/Stable). The 'bb+' Standalone Credit Profile (SCP) of ISV is influenced by Italy's sovereign rating of 'BBB-'/Stable through the insurer's concentrated exposure to Italian sovereign debt.

Fitch expects ISV would receive support from ISP if required. As a result, we have notched up ISV's SCP once to arrive at the 'BBB-' IDR, in line with ISP's. We also give ISV's IFS Rating a single-notch uplift from the insurer's standalone IFS assessment, resulting in an IFS Rating of 'BBB'. ISV is a significant contributor to the parent's profitability and an important pillar of the parent's capital-light growth strategy.

ISV's SCP is influenced by the company's concentrated exposure to Italian sovereign debt, which is reflected in our view of the insurer's capitalisation, as measured by Fitch's risk-adjusted Prism Factor-Based Capital Model (Prism FBM), and of ISV's investment-and-asset risk. To match its domestic insurance liabilities, ISV, including Fideuram Vita, held EUR55 billion of Italian sovereign bonds (2019: EUR52 billion) corresponding to 7.8x consolidated shareholders' funds at end-2020 (2019: 8.0x).

ISV's Prism FBM score was 'Strong' based on end-2020 financials, in line with 2019's. The insurer's consolidated Solvency II ratio, calculated using the standard formula, was strong at 224% at end-2020 (2019: 238%), up from 193% at end-1H20, which was negatively affected by pandemic-related adverse market conditions. Its Fitch-calculated financial leverage ratio (FLR) increased to 26% at end-2020 (end-2019: 21%), following the issuance of EUR600 million Tier 2 subordinated notes in December 2020. Fitch views this level of FLR as supportive of ISV's ratings.

Fitch ranks ISV's business profile as 'Most Favourable' compared with peers' and views it as supportive of the insurer's ratings. ISV is the second-largest Italian life insurance group by premiums with EUR21 billion of gross premiums underwritten in 2020 and a market share of 18%. ISV has a strong franchise in Italy and can exploit its pricing power. It distributes its products mainly through ISP's bank branches and provides single-premium products to ISP's network.

ISV improved its diversification into non-life, following its acquisition in May 2020 of 50% plus one share of RBM Assicurazione Salute S.p.A., an Italian health insurer. ISV also acquired Cargeas Assicurazioni S.p.A., an Italian non-life insurer, as part of the merger of UBI Banca S.p.A. into ISP. We believe both acquisitions support ISV's strategy to become the largest non-motor insurer in Italy. ISV was the seventh largest non-life insurance group in Italy by premiums as at end-1H21, with a market share of 4%.

ISV's net income return-on-equity was strong at 10% in 2020 (2019: 12%), supported by reasonable life net inflows. ISV's 1H21 net income increased to EUR448 million (1H20: EUR339 million), fuelled by a very strong performance in the life sector. Fitch views ISV's earnings as very strong and supportive of ratings. We expect ISV to maintain this level of profitability in 2021.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

A downgrade of ISP's IDR.

A weakening of ISP's propensity to support ISV.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

An upgrade of ISP's IDR.

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 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579

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.

Public Ratings with Credit Linkage to other ratings

The ratings of ISV are directly linked to ISP's.

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 ACTIONSENTITY/DEBT	RATING		PRIOR
Intesa Sanpaolo Vita S.p.A.	LT IDR	BBB- 	Affirmed		BBB-
	Ins Fin Str	BBB 	Affirmed		BBB

subordinated

LT	BB 	Affirmed		BB

VIEW ADDITIONAL RATING DETAILS

Additional information is available on www.fitchratings.com

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