TEXT-S&P affirms Spanish insurer CESCE at 'BBB-'

Wed Dec 12, 2012 11:40am EST

Overview
     -- Following the Spanish government's decision to privatize insurer 
Compania Espanola de Seguros de Credito a la Exportacion S.A. (CESCE), we have 
reassessed the likelihood of CESCE receiving extraordinary government support 
in the event of financial distress as moderately high instead of high. 
     -- We base this on our view that CESCE will continue to play a very 
important role for the government, but would have only a limited link with the 
state. 
     -- CESCE displays good capitalization and a resilient operating 
performance in a difficult economic environment, but its concentration of 
exposure in Spain remains a rating constraint.
     -- We are affirming our 'BBB-' ratings on CESCE.
     -- The negative outlook reflects that on the Kingdom of Spain.
 
Rating Action
On Dec. 12, 2012, Standard & Poor's Ratings Services affirmed its 'BBB-' 
long-term counterparty credit and financial strength ratings on Spanish 
insurer Compania Espanola de Seguros de Credito a la Exportacion S.A. (CESCE). 
The outlook is negative. 


Rationale
The rating actions reflect our reassessment of the likelihood of extraordinary 
government support for CESCE, in accordance with our criteria for 
government-related entities (GREs), following the Spanish government's 
announcement of its plan to privatize the insurer. 

The Kingdom of Spain (BBB-/Negative/A-3) currently owns a majority 50.25% 
stake in CESCE, a public-limited insurance company. Besides its traditional 
trade credit insurance portfolio, CESCE is the exclusive credit insurer of the 
Spanish government, supporting the expansion of Spain's export business. 
However, after the planned privatization the company would in our view only 
have a "limited" link with the government, instead of "strong" previously. As 
a result, we have changed our view of the likelihood of the government 
providing extraordinary support to CESCE to "moderately high" from "high". 

In accordance with our criteria for (GREs), our rating approach is based on 
our view of CESCE's:

     -- "Very important" role for the government, owing to its exclusive remit 
to support the expansion of Spain's export business and the importance of the 
export credit insurance business to the Spanish economy; and
     -- "Limited" link to the government, reflecting the government's planned 
divestment of its majority shareholding (50.25%) in the company and the 
ongoing privatization process.
 
The ratings on CESCE remain supported by the company's good capitalization, 
including strong capital adequacy, and resilient operating performance in the 
currently difficult economic environment in Spain. These strengths are partly 
offset by the concentration of CESCE's activities in Spain and on a business 
line that is subject to swings in the economic cycle, as well as the reduced 
quality of the company's investments. 

Based on our criteria for country risk, the ratings on CESCE remain 
constrained by the rating on Spain because the company writes the majority of 
its business in Spain and most of its assets comprise Spanish debt. 

Outlook
The outlook on CESCE remains negative, reflecting that on the long-term rating 
on Spain and our view of the potential heightening of country risk for the 
company.

We could lower the ratings on CESCE if we were to lower the rating on Spain, 
or if there were a significant weakening of CESCE's business or financial risk 
profile caused by significant decreased revenues, combined ratios clearly 
exceeding 100%, or a substantial reduction in capital below a good level 
according to our risk-based capital model. We would revise the outlook on 
CESCE to stable if the outlook on Spain were revised to stable.

Related Criteria And Research
All articles listed below are available on RatingsDirect on the Global Credit 
Portal, unless otherwise stated.
     -- Nonsovereign Ratings That Exceed EMU Sovereign Ratings: Methodology 
And Assumptions, June 14, 2011
     -- Principles Of Credit Ratings, Feb. 16, 2011
     -- Rating Government-Related Entities: Methodology And Assumptions, Dec. 
9, 2010
     -- Use Of CreditWatch And Outlooks, Sept. 14, 2009
     -- Criteria Update: Factoring Country Risk Into Insurer Financial 
Strength Ratings, Feb. 11, 2003


Ratings List
Ratings Affirmed

Compania Espanola de Seguros de Credito a la Exportacion S.A.
 Counterparty Credit Rating             BBB-/Negative/--   
 Financial Strength Rating              BBB-/Negative/--   



Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.
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