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RPT-Fitch Upgrades Groupama's IFS Rating to 'BBB'; Outlook Positive
February 11, 2014 / 11:07 AM / 4 years ago

RPT-Fitch Upgrades Groupama's IFS Rating to 'BBB'; Outlook Positive

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Feb 11 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has upgraded Groupama S.A.’s and its core subsidiaries’ Insurer Financial Strength (IFS) ratings to ‘BBB’ from ‘BBB-'. Groupama S.A.’s Issuer Default Rating (IDR) has also been upgraded to ‘BBB-’ from ‘BB+'. The Outlooks on the IDR and IFS ratings have also been revised to Positive from Stable.

The subordinated debt instruments issued by Groupama S.A. have been upgraded to ‘BB’ from ‘BB-'.

KEY RATING DRIVERS

The upgrades reflect the group’s return to profit in its 1H13 to EUR187m, compared with a EUR87m loss in 1H12, mostly due to the absence of exceptional charges. Profit recovery was also due to a stronger contribution from the French business, while international insurance operations and banking activities generated stable positive net income.

The ratings also reflect an improvement in Groupama’s combined ratio to 100.9% (103.2% at 1H12) as well as management’s conservative decision to strengthen the life fund for future appropriation by EUR250m.

In addition, Groupama’s solvency was solid at 1H13 (Solvency 1 ratio of 170%) and financial leverage improved to 32% from 34%. Both metrics are strong compared with Fitch medians for insurance groups rated in the ‘BBB’ category. The change in Outlook to Positive reflects Fitch’s expectation that the recovery in profitability is likely to be sustained for FY13 and into 2014.

RATING SENSITIVITIES

Key rating triggers that could result in a rating upgrade include a sustained improvement in profitability, with annual net income above EUR200m on average over the cycle, together with no material deterioration in solvency or financial leverage from current levels.

The ratings actions are as follows:

Groupama S.A.

IFS rating upgraded to ‘BBB’ from ‘BBB-'; Outlook revised to Positive from Stable

Long-term IDR upgraded to ‘BBB-’ from ‘BB+'; Outlook revised to Positive from Stable

Dated subordinated debt (ISIN FR0010815464) upgraded to ‘BB’ from ‘BB-’

Undated subordinated debt (ISIN FR0010208751) upgraded to ‘BB’ from ‘BB-’

Undated deeply subordinated debt (ISIN FR0010533414) upgraded to ‘BB’ from ‘BB-’

Groupama GAN Vie

IFS rating upgraded to ‘BBB’ from ‘BBB-'; Outlook revised to Positive from Stable

GAN Assurances

IFS rating upgraded to ‘BBB’ from ‘BBB-'; Outlook revised to Positive from Stable

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