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April 24 (The following statement was released by the rating agency)
Fitch Ratings has affirmed Camca Assurance's (CAA) and Camca Reassurance's (CAR) Insurer Financial Strength Ratings (IFS) at 'A' and their Issuer Default Ratings (IDR) at 'A-'. The Outlooks are Stable.
Both companies, domiciled in the Grand Duchy of Luxembourg, are owned directly and indirectly by the 39 banks of Credit Agricole (CA; A/Stable).
KEY RATING DRIVERS
The affirmation reflects the companies' large degree of integration within the CA group, given their role in guaranting the group's guaranteed residential loans. Both companies are reliant on their parent for their role, business position and strategic direction. Their ratings are therefore mainly driven by CA's ratings.
The Stable Outlook for both companies is directly linked to that of CA group. Nevertheless, Fitch expects that their capital and earnings will remain resilient in the next 12-24 months, supported by a strict underwriting discipline in light of the current weak economic environment, including limited mortgage funding availability and likely high French unemployment. Fitch expects that CA's regional banks would provide support, if needed, to their insurance subsidiaries.
Fitch considers CAA's credit profile to be sound, as evidenced by low defaults on its guaranteed insurance business for residential loans. CAA's net combined ratio deteriorated to 85% at FYE13 (end 2012: 68%) but remained at a sound level. With EUR151m gross written premiums (GWP), CAA posted a EUR15m net profit for 2013, up 12% on 2012. CAA's financial revenue increased 22% yoy in 2013 and the company reported EUR11m capital gains. CAR's combined ratio, on the other hand, sharply improved to 87.5% from 171%, following a material decrease of its loss ratio due to provision releases.
Fitch views CAA's capital resources as strong. Regulatory solvency ratios strengthened to 2.7x the minimum required by the regulator. At end-2013 CAR regulatory solvency was slightly below the minimum required at 98%. However, CAR's reported solvency position is supplemented by its substantial equalisation reserve (EUR128m at end-2013), which Fitch considers to be loss-absorbing capital. When taking into account the sizeable equalisation reserve, CARs' solvency ratio was 1,390% at end-2013. In March 2014 CAR issued intragroup EUR500,000 subordinated debt to increase its statutory solvency cover slightly to above 100%.
Any changes to their parent's ratings will be reflected in CAA's and CAR's ratings. Any material deterioration in the prospect of support for these companies from their parent could lead to a downgrade.