Fitch Ratings has upgraded Groupama S.A. and its core subsidiaries’ Insurer Financial Strength (IFS) ratings to ‘BBB-‘ from ‘BB+’. Groupama S.A.’s Issuer Default Rating (IDR) has also been upgraded to ‘BB+’ from ‘BB’. The Outlooks on the IDR and IFS ratings are Stable.
The two subordinated debt instruments issued by Groupama S.A. have been upgraded to ‘BB-‘ from ‘B+’ and ‘B-‘ respectively and removed from Rating Watch Negative (RWN) where they were placed on 27 September 2011.
The deeply subordinated notes issued by Groupama S.A. have been upgraded to ‘B-‘ and revised to Rating Watch Positive (RWP) from RWN.
Fitch has withdrawn GAN Eurocourtage’s IFS rating as this company no longer exists following its merger with Groupama S.A. Accordingly, Fitch will no longer provide rating or analytical coverage for GAN Eurocourtage.
The rating actions reflect the material recovery in the group’s solvency at year-end 2012 from the low level reached a year earlier (Solvency 1 increased to 179% from 107%) due to both management actions and recovery in financial markets. Offsetting this positive development, the full year 2012 operating result (i.e. excluding the negative impact from the disposal of subsidiaries) was a loss of EUR255m, mostly due to exceptional charges such as goodwill impairments and restructuring provisions.
The upgrade of the subordinated debt instruments’ rating reflects Fitch expectation that coupons will be paid in the future. As such, the ratings are now in line with Fitch’s standard notching methodology for hybrid securities.
The rating action on the deeply subordinated notes reflects Fitch’s view that coupon payments will recommence and that recovery assumptions on this instrument have been upgraded to Recovery Rating ‘RR1’ from ‘RR2’. The RWP status also reflects Fitch’s expectation that management will resume coupon payments in 2013. Fitch would likely upgrade the rating on these notes to ‘BB-‘ if Groupama resumes coupon payments on 22 October 2013.
The key rating triggers that could result in a downgrade include further non-payment of coupons, deterioration of the group’s financial profile, especially in terms of solvency (Solvency 1 ratio below 130%), as well as its inability to translate measures aimed at improving performance into a positive operating profit in 2013.
The key rating triggers that could result in an upgrade include further improvement in the Solvency 1 ratio (above 180% at year-end 2013) and financial leverage (below 35%) as well as a return to profitability (positive operating profit for the full year 2013).
The ratings actions are as follows:
Groupama S.A.
IFS rating upgraded to ‘BBB-‘ from ‘BB+’; Outlook Stable
Long-term IDR upgraded to ‘BB+’ from ‘BB’; Outlook Stable
Dated Subordinated debt (ISIN FR0010815464) upgraded to ‘BB- from ‘B+’, removed from RWN
Undated Subordinated debt (ISIN FR0010208751) upgraded to ‘BB-‘ from ‘B-‘, removed from RWN
Undated Deeply Subordinated debt (ISIN FR0010533414) upgraded to ‘B-‘ from ‘CCC’,
Revised to RWP from RWN
Groupama GAN Vie
IFS rating upgraded to ‘BBB-‘ from ‘BB+’; Outlook Stable
GAN Assurances
IFS rating upgraded to ‘BBB-‘ from ‘BB+’; Outlook Stable
GAN Eurocourtage
IFS rating withdrawn
