Fitch ratings agency downgraded Italian insurance giants Generali and Fondiaria-SAI on Tuesday, saying the companies were being affected by "ongoing pressure" from sovereign debt crises in Italy and Spain.

Fitch downgraded Generali's rating to A- from AA- with a negative outlook and Fondiaria-SAI to BB- from BB+, warning of "challenging investment conditions" and "fundamental uncertainties with regards to sovereign debt."

"The ratings actions consequently reflect the degree of sensitivity of the insurers' capital adequacy to stress test assumptions over the credit quality of their holdings of Italian and Spanish government and bank debt," Fitch added.

The agency said Italian insurers "may not be able to pass on most of the losses incurred from an unlikely default of Italian government debt" and that the ratings could be upgraded if the debt situation "improves and stabilises."

Generali announced a sharp reduction in net profit for the third quarter, mainly due to the depreciation of its Greek bonds and market turbulence.

Profits fell to 19.5 million euros ($25.4 million) for the quarter compared to a profit of 439.8 million euros a year earlier, the company said last month.

The company is active in more than 60 countries, including a strong presence in Central and Eastern Europe as well as interests in China and India.

channelnewsasia.com