Standard & Poor’s Ratings Services placed its ‘BBB+’ long-term counterparty credit and insurer financial strength ratings on France-based composite insurer Groupama S.A. on CreditWatch with negative implications. At the same time, we placed the ‘BBB-‘ ratings on the group’s hybrid notes on CreditWatch with negative implications.
We also placed the long- and short-term ‘BBB/A-2’ counterparty credit ratings on Groupama’s wholly owned banking arm, Groupama Banque, on CreditWatch with negative implications.
The rating action reflects our perception that adverse capital market conditions may be weakening Groupama’s financial profile.
In our view, the recent negative capital market developments might have further undermined Groupama’s already weak and volatile capital adequacy.
Furthermore, we believe management has not so far taken action to significantly reduce this volatility. In particular, we understand that Groupama has not yet started its planned derisking of its equity exposure,
which stood at 16% of total investments at year-end 2010. In addition, we believe that Groupama’s credit risk has increased because of the group’s sizable exposure to sovereign bonds, in particular those of Greece
(CC/Negative/C) and Portugal (BBB-/Negative/A-3), which represented 7.8% and 3.3% of the group’s shareholder’s funds on June 30, 2011, after taxes and profit sharing.
Furthermore, we note that Groupama’s financial flexibility is limited by its capacity for issuing additional hybrid capital and by the likely cost of raising such capital.
Standard & Poor’s expects to resolve the CreditWatch placement next week, once we have reassessed the elements supporting Groupama’s ratings. In particular, we are reassessing the impact of the capital markets downturn on Groupama’s capital adequacy. If we determine that the downturn has significantly reduced
capital adequacy, we could lower the ratings on Groupama by up to two notches, based on our current view.
Source : Standard & Poor’s
