OREANDA-NEWS. Fitch Ratings has revised Intesa Sanpaolo Vita's (ISV) and Poste Vita's Outlooks to Negative from Stable. Fitch has also affirmed ISV's and Poste Vita's Insurer Financial Strength (IFS) Ratings and Long-Term Issuer Default Ratings (IDR) at 'BBB+'. A full list of rating actions is available at the end of this commentary.

KEY RATING DRIVERS

The rating action follows a similar rating action on the companies' respective parents, Intesa Sanpaolo and Poste Italiane as a result of Fitch's recent revision of the Outlook on Italy to Negative from Stable (see Fitch Revises Italy's Outlook to Negative; Affirms at 'BBB+' dated 21 October 2016; Fitch Revises 4 Italian Banks' Outlooks to Negative on Sovereign Outlook Revision dated 28 October 2016 and Fitch Revises 9 Italian PSEs' Outlook to Negative on Sovereign Rating Action dated 28 October 2016 on www. fitchratings. com).

ISV and Poste Vita are significantly exposed to Italian sovereign debt and this heavily influences their ratings. Their IFS ratings are constrained by Italy's Long-Term IDR (BBB+/Negative). ISV's and Poste Vita's unconstrained IFS ratings are 'A-'.

The large exposures of Italian sovereign debt result from the need to match life insurance liabilities with bonds that yield more than the average guaranteed return, which also limits lapse risk. ISV at end-June 2016 held EUR50bn of Italian government bonds or around 10x consolidated shareholders' funds, excluding Fideuram Vita. Poste Vita at end-2015 held EUR75bn of Italian sovereign bonds or around 23x consolidated shareholder's funds.

RATING SENSITIVITIES

An upgrade of ISV's and Poste Vita's ratings is unlikely in the near future given the Negative Outlooks on Italy's rating and on their respective parent companies' ratings.

If the ratings on Italy or on their respective parent companies are dowфngraded, the ratings on ISV and Poste Vita are also likely to be downgraded.