December 15, 2017 / 3:47 PM / a year ago

Fitch Affirms SACE's IDR at 'BBB+'; Outlook Stable

(The following statement was released by the rating agency) LONDON, December 15 (Fitch) Fitch Ratings has affirmed SACE S.p.A.'s (SACE) Long-Term Issuer Default Rating (IDR) at 'BBB+' with Stable Outlook and Short-Term Foreign Currency IDR at 'F2'. Fitch has also affirmed SACE's perpetual subordinated notes at 'BBB-'. KEY RATING DRIVERS The ratings reflect SACE's very strong capitalisation and strong business profile as Italy's export credit agency as well as its financial exposure to Italy (BBB/Stable). At end-2016, SACE held EUR1.3 billion (around 20% on total invested assets) of Italian sovereign bonds and EUR3.3 billion (around 50% of total invested assets) of cash balances with Cassa Depositi e Prestiti (BBB/Stable), SACE's parent company, and some Italian banks. SACE's ratings are therefore heavily influenced by the credit quality of Italy and Cassa Depositi e Prestiti. This influence is reflected in our view of SACE's asset concentration risk and sovereign constraint on its ratings at 'BBB+'. We have set the sovereign constraint at one notch higher than the sovereign rating of Italy, in recognition of SACE's strong credit profile and geographical diversification. SACE's off-balance sheet exposure to pledged guarantees and insured credits (EUR59 billion at end-2016) is well-diversified by geography and sector. Fitch's view of SACE's capitalisation is based on the company's relatively low multiple of nominal credit exposure to equity and appropriate reserving. SACE uses Solvency II risk metrics to assess its solvency capital position, although it is not regulated as an insurance company, and therefore is not subject to Solvency II. At end-1H17, SACE's risk-based solvency margin, calculated according to its partial internal capital model, was 1.6x risk capital based on a prudent confidence level of 99.85%, which SACE regards as compatible with a 'AA' rating. We expect SACE's capitalisation to remain very strong in 2017. SACE further increased its use of reinsurance to improve the portfolio mix and stabilise financial results. The ratio of net written premiums at 70% of gross written premiums in 2016 reflected this trend (2015: 81%). However, this approach introduces additional counterparty credit risk, as the main reinsurance provider is the Italian government, and intensifies significant concentration risk. SACE's 2012-2016 average return on equity was 7%, which Fitch views as strong and commensurate with SACE's rating. We expect SACE's return on equity to remain at least at this level in 2017. SACE's consolidated net income was EUR230 million at end-1H17 (end-1H16: EUR103 million), but its underwriting profits can be volatile, due to the timing and magnitude of recoveries from debtors. Investing and hedging activities allow the company to smooth volatile underwriting results, and stabilise net profitability. In the medium term, Fitch expects SACE to rebalance its sources of profit towards underwriting results and to a lesser extent, to investment income. SACE is Italy's export credit agency supporting the internationalisation of Italian companies. With gross written premiums of EUR601 million at end-2016, SACE provides insurance coverage against commercial and political risks, financial guarantees and supports business development of small and medium-sized Italian enterprises RATING SENSITIVITIES Deterioration in the credit quality of its investments could lead to a downgrade of SACE, as could a significant weakening in its capitalisation. SACE's ratings would be downgraded if Italy's sovereign rating is downgraded. Should Italy's rating be downgraded to 'BBB-' or lower, it is likely that Fitch would reconsider its approach of rating SACE one notch above the sovereign and would equalise its rating with the sovereign. An upgrade of SACE's ratings is unlikely in the near future given the sovereign constraint already at one notch above the sovereign rating. Contact: Primary Analyst Nicola Caverzan Associate Director +44 20 3530 1642 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Harish Gohil Managing Director +44 20 3530 1257 Committee Chairperson Chris Waterman Managing Director +44 20 3530 1168 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Criteria (pub. 30 Nov 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here Endorsement Policy here 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. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001 Fitch Ratings, Inc. is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (the "NRSRO"). While certain of the NRSRO’s credit rating subsidiaries are listed on Item 3 of Form NRSRO and as such are authorized to issue credit ratings on behalf of the NRSRO (see here), other credit rating subsidiaries are not listed on Form NRSRO (the "non-NRSROs") and therefore credit ratings issued by those subsidiaries are not issued on behalf of the NRSRO. However, non-NRSRO personnel may participate in determining credit ratings issued by or on behalf of the NRSRO.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below