Fitch Affirms Groupama's IFS Rating at 'BBB'; Outlook Positive

Wed Aug 6, 2014 7:17am EDT

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(The following statement was released by the rating agency) PARIS/LONDON, August 06 (Fitch) Fitch Ratings has affirmed Groupama S.A. and its core subsidiaries' Insurer Financial Strength (IFS) ratings at 'BBB'. Groupama S.A.'s Issuer Default Rating (IDR) has also been affirmed at 'BBB-'. The Outlooks on the IDR and IFS ratings are Positive. The subordinated debt instruments issued by Groupama S.A. have been affirmed at 'BB'. KEY RATING DRIVERS Groupama SA's ratings reflect its improving capital adequacy, manageable debt and significant business and risk diversification. The ratings also take into account Groupama's solid business position, with a strong franchise in France in particular, and recovering profitability. The group returned to profit in 2013 and 1H14, reflecting the limited impact of exceptional charges and improving underlying operating performance. Both French and international operations contributed to profit recovery. The ratings also reflect an improvement in Groupama's combined ratio to 98.5% in 1H14 (100.8% in 2013) as well as management's conservative decision to strengthen the life fund for future appropriation by about EUR500m over the past 18 months. In addition, Groupama's solvency was solid at 1H14 (Solvency 1 ratio of 239%) and financial leverage remains broadly unchanged at about 30%. Both metrics are strong compared with the Fitch median for insurance groups rated in the 'BBB' category. The significance of risky investments (stocks and below investment grade bonds) is still high compared with surplus but has materially reduced over the past three years to reach 152% at end-2013. Fitch expects this downward trend to continue in 2014. The Positive Outlook reflects Fitch's expectation that the recovery in profitability is likely to be sustained for the full year 2014. RATING SENSITIVITIES Key rating triggers that could result in an upgrade include a sustained improvement in profitability, with annual net income for full year 2014 of more than EUR200m, together with no material deterioration in solvency or financial leverage from current levels (200% regulatory solvency and 31% Fitch calculated financial leverage ratio at end-2013). The ratings actions are as follows: Groupama S.A. IFS rating affirmed at 'BBB'; Outlook Positive Long-term IDR affirmed at 'BBB-'; Outlook Positive Dated subordinated debt (ISIN FR0010815464) affirmed at 'BB' Undated subordinated debt (ISIN FR0010208751) affirmed at 'BB' Undated subordinated debt (ISIN FR0011896513) affirmed at 'BB' Undated deeply subordinated debt (ISIN FR0010533414) affirmed at 'BB' Groupama GAN Vie IFS rating affirmed at 'BBB'; Outlook Positive GAN Assurances IFS rating affirmed at 'BBB'; Outlook Positive Contact: Primary Analyst Marc-Philippe Juilliard Senior Director +33 1 44 29 91 37 Fitch France S.A.S. 60, rue de Monceau 75008 Paris Secondary Analyst Amelie Hibos Analyst +33 1 44 29 91 78 Committee Chairperson Federico Faccio Senior Director +44 20 3530 13 94 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria, "Insurance Rating Methodology", dated 13 November 2013, are available at www.fitchratings.com. Applicable Criteria and Related Research: Insurance Rating Methodology here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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