AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of UnipolSai Assicurazioni S.p.A. (Unipolsai) (Italy). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect UnipolSai’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

UnipolSai’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), was at the strongest level at year-end 2023 and is expected to be at least at the very strong level over the medium term.

Factors supporting the balance sheet strength assessment include the company’s low reinsurance dependence, good internal capital generation and good financial flexibility. An offsetting factor is the material, albeit reducing, concentration of UnipolSai’s investment portfolio in Italian government bonds (31.6% of investments at year-end 2023), which exposes its risk-adjusted capitalisation to volatility. UnipolSai’s solvency capital requirement (SCR) ratio under Solvency II stood at 322% at the end of first-quarter 2024.

The risk-adjusted capitalisation for UnipolSai’s holding company, Unipol Gruppo S.p.A. (Unipol Gruppo), was also at the strongest level at year-end 2023. Unipol Gruppo is considered to have a neutral impact on UnipolSai’s ratings, although it has a higher level of financial leverage than UnipolSai and a weaker solvency position (SCR ratio 217% at the end of first-quarter 2024).

UnipolSai’s technical performance in 2023 was strong, driven by sound non-life and life operations, with a return on equity of 10.9% (as calculated by AM Best). Life business profitability benefited from the rise in interest rates, as evidenced by a healthy margin of 2.33% (at first-quarter 2024) between the average yield of segregated accounts and average minimum guarantee. Non-life technical performance in 2023 was below the company’s track record, driven by a significant impact of NAT CAT losses and inflationary pressures, as evidenced by a combined ratio of 98.2% (as calculated by AM Best).

UnipolSai is one of the two largest players in the Italian non-life insurance market, with a particularly strong position in the motor market. Performance is supported by the company’s access to data and sophisticated pricing capabilities, as well as its extensive use of telematics applied to the non-life segment. However, the concentration of its business portfolio in Italy exposes UnipolSai’s operations to any adverse changes in the country’s economic, political and regulatory environments.

The merger plan of UnipolSai into Unipol Gruppo is ongoing and is expected to be finalised before year-end 2024. AM Best does not anticipate that the credit profile of the combined entity will be impacted materially by this transaction based on the information currently available.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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