Fitch maintains insurer Adriatic Slovenica’s BBB- rating

Fitch rating agency has maintained its BBB- rating of Slovenian insurer Adriatic Slovenica on rating watch positive, but has also revised the rating watch on holding company KD Group from evolving to negative, according to an official press release, published on Thursday. Fitch expects that Adriatic Slovenica’s credit profile will improve following its acquisition by General CEE Holding. It also noted Adriatic Slovenica has a solid and stable net income. In addition, the rating agency said Adriatic Slovenica could potentially rely on ownership support once it becomes a part of the Generali group. To note, Adriatic Slovenica is the third-largest insurer in the country with a market share of 14%, while its asset management operations also third with a 20% market share at the Slovenian mutual fund market.

Meanwhile, however, Fitch stressed that profitability at the consolidated KD Group level has been weaker and more volatile. Reflecting on its revision of KD Group’s rating watch, Fitch argued that following the sale of Adriatic Slovenica, the group will remain a very small real estate investor, regarded as a higher risk, and will no longer have access to Adriatic Slovenica’s dividends. To remind, the transaction is expected for completion in H2 2018. Fitch also stressed KD Group’s high financial leverage of 43% at end-2017. On the other hand, it noted the group will use the funds from the sale of Adriatic Slovenica to repay all debt at group level, which will benefit its credit profile. While the group’s consolidated capitalisation was assessed as very strong, the quality of capital was considered weak. In addition, KD Group reported positive, but volatile net profits in the period 2013-2017.

Fitch plans to resolve the rating watches after the completion of the sale of Adriatic Slovenica to Generali and following the assessment of the importance of Adriatic Slovenica to Generali and the separate credit profiles of both Adriatic Slovenica and KD Group.

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