Best’s Market Segment Report: AM Best Assigns Stable Outlook to Italian Life Market

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    AMSTERDAM–(BUSINESS WIRE)–AM Best has assigned a stable outlook to the Italian life
    insurance market. Key supporting factors include the active management
    of business mix, with a shift of production from traditional savings
    products to unit-linked and hybrid products. Profitability has been
    helped by average guarantees on in-force business that are low and
    expected to remain below investment returns. Furthermore, insurers
    demonstrate solid solvency, although balance sheets are sensitive to
    potential increases in interest spreads due to significant exposure to
    local sovereign bonds.

    A new Best’s Market Segment Report, titled “Market Segment
    Outlook: Italy Life”, states the Italian life insurance market has
    reported healthy profits over recent years, and AM Best expects good
    market discipline to support prospective technical margins.

    The report adds that holdings in Italian government debt expose the
    market to local economic and political instabilities, and a sharp
    increase in Italian government yields could weaken balance sheets due to
    the devaluation of assets. Italian life insurers are heavily exposed to
    the Italian banking sector, as the main distributor of their products
    and through investments in the debt instruments of financial
    institutions. The banking sector’s exposure to non-performing loans
    sharply decreased in 2017 and 2018, but remains at an elevated level.

    Despite a challenging operating environment, the Italian life insurance
    segment is expected to maintain solid technical profitability and
    balance sheet strength owing to its proven ability to adapt its business
    mix and reduce average guarantees in portfolios through active
    management. However, further weakening in the operating environment,
    particularly a sustained recession or a widening in government spreads,
    could impact technical results and the solvency levels of the segment,
    and cause AM Best to revise its outlook to negative.

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    Michael Dunckley, CFA
    Associate Director, Analytics
    20 308 5422

    [email protected]

    Jose Berenguer
    Associate Financial Analyst
    20 308 5429

    [email protected]

    Yvette Essen
    Director, Research, Communications
    Media –
    Europe, Middle East & Africa
    +44 20 7397

    [email protected]

    Edem Kuenyehia
    Director, Market Development &
    20 7397 0280

    [email protected]