Standard & Poor’s Ratings Services assigned its ‘A-‘ long-term issue rating to the proposed $500 million undated notes to be issued by French insurer CNP Assurances (A+/Negative/–). The rating on the notes is subject to confirmation, following S&P’s receipt and review of the final terms and conditions.
The rating is two notches below the counterparty credit rating on CNP, reflecting the standard notching for junior subordinated debt issues. S&P has analysed and rated the proposed debt issue on the understanding that, when issued, the notes will be subordinated to debt held by senior creditors.
The rating agency expects to classify the notes as “intermediate equity content” under their hybrid capital criteria, and would confirm this following the review of the final terms. S&P includes securities such as these in total adjusted capital (TAC) up to a maximum of 25% of TAC, which is their measure of available capital in the consolidated risk-based capital analysis of insurance companies. Under such criteria, the notes can only be included if they are also considered eligible for regulatory solvency treatment and the aggregate amount of included notes does not exceed the total amount eligible for regulatory solvency treatment.
S&P understands that the notes contain interest deferral provisions that enable CNP to optionally defer coupons at any time, unless the issuer has declared or paid dividends during the six months before the interest payment date. CNP can call the junior subordinated notes after six years, in October 2018, and on any coupon date thereafter, subject to approval from its regulator. Initially, CNP will pay a fixed coupon for six years, after which the coupon will be reset every six years. A step-up of 100 basis points would apply at the second reset date (October 2024).
S&P understands that CNP plans to issue these notes to strengthen its regulatory solvency margin, which was 183% including unrealized gains and 113% excluding these gains at June 30, 2012.
