July 3, 2017 / 3:59 PM / 2 months ago

Fitch: Unipol's Insurance Ratings Unaffected by Group Reorganisation

(The following statement was released by the rating agency) LONDON, July 03 (Fitch) Fitch Ratings says that Unipol Gruppo SpA's (IDR: BBB-/Stable) and UnipolSai Assicurazioni SpA's (together Unipol; IFS: BBB/Stable) ratings are not affected by the group's reorganisation of insurance operations and by the banking unit's restructuring plan. On 30 June 2017, Unipol announced a plan to spin off about EUR3 billion of Unipol Banca's bad loans, which will be transferred into a separate new company owned by Unipol. The new company will acquire the bad loans portfolio at a price that corresponds to around 20% of its nominal value. Unipol also announced the reorganisation of the group's insurance operations, with the transfer of Unisalute (a health insurance specialist) and Linear (Unipol's direct motor insurer) from Unipol Gruppo to UnipolSai (Unipol's primary insurance subsidiary). Unipol will also exercise the put option on the 50% share in Popolare Vita (the bancassurance joint-venture between UnipolSai and Banco BPM) and exit this bancassurance agreement at end-2017. Fitch's analysis had incorporated the economic impact of the banking unit's restructuring plan. This transaction does not change Fitch's view on Unipol's capitalisation, as the group will ultimately retain the underlying credit risk. However, we note that the restructuring plan crystalises the contingent losses arising from Unipol's banking operations. Unipol's capitalisation could benefit in the future if recovery rates on the bad loans portfolio transferred to the new company were higher than 20%. We expect Unipol's score in Fitch's Prism factor-based capital model to remain 'Strong', after the banking unit's restructuring costs and the exercise of the put option on Popolare Vita's stake are taken into account. However, this is subject to the amount of proceeds that Unipol will receive from Banco BPM, which will be determined on the basis of the shareholders' agreement in force between UnipolSai and Banco BPM. Unipol estimates a consolidated net loss arising from the banking unit's restructuring of about EUR780 million in 2017. We view this loss as a one-off item, as the group will book all the restructuring costs in the current financial year. We expect Unipol's profitability to recover to a level commensurate with the ratings in 2018. Unipol's 2012-2016 average return on equity was 5%. We believe that transfer of Unisalute and Linear to UnipolSai will streamline insurance operations within Unipol, although we do not expect cost synergies from this operation. Fitch also believes that the announced sale of 50% shareholding in Popolare Vita is neutral to Unipol's business profile, as the group will maintain an important presence in the bancassurance arena in Italy through its bancassurance agreement with BPER Banca. Unipol expects to complete all these transactions by end-2017, subject to regulatory approvals. Contact: Federico Faccio Senior Director +44 20 3530 1394 Fitch Ratings Limited 30 North Colonnade London E14 5GN Nicola Caverzan Associate Director +44 20 3530 1642 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@fitchratings.com. Additional information is available on www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. 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