(The following statement was released by the rating agency)
Dec 20 -
Summary analysis -- MMA IARD Assurances Mutuelle ------------------ 20-Dec-2012
CREDIT RATING: Country: France
Local currency A-/Watch Dev/--
Primary SIC: Fire, marine, and
Credit Rating History:
Local currency Foreign currency
30-Nov-2010 A-/-- --/--
20-Nov-2007 A/-- --/--
The ratings on France-based property/casualty (P/C) insurer MMA IARD
Assurances Mutuelle (MMA), a major player in the French P/C market, reflect
Standard & Poor's Ratings Services' view of its strong competitive position
and its prudent investment strategy. MMA's financial management practices,
which we consider weak in the life business, and its operating performance,
which we view as not commensurate with the current ratings, partially offset
these strengths .
MMA's competitive position is strong in the French P/C market, where it holds
a market share of 9.7% and has access to a large base of roughly three million
customers. It has achieved its solid competitive position owing to its strong
franchise, long-standing expertise in the French P/C market and strong
distribution capabilities, thanks to the third-largest tied agent network in
We view MMA's investment profile as prudent, with low credit risk (86% of
bonds in the A range or above) that reflects management's policy of primarily
investing in highly rated government bonds and liquid fixed-income securities.
MMA's exposure to Southern European bonds, in particular Italy, is manageable,
in our view. MMA has some exposure to equities (8% of invested assets at
end-2011) but the insurer's long-term holding policy, with a higher cushion
amount of unrealized gains on equities than peers (17% of book value at
end-2011), mitigates our concerns.
We believe MMA's capitalization is strong. According Standard & Poor's
risk-based model, the insurer's capital adequacy has historically been at
least consistent with the current ratings. It also showed more resilience than
peers during the latest capital market downturn, and was maintained at strong
levels at end-2011. Quality of capital is also satisfactory, with core
shareholders' funds representing 54% of total adjusted capital (TAC). Both
reinsurance and reserving practices are considered adequate.
However, we consider MMA's financial management practices in its life sector
to be weak and not in line with the importance of this business for the group,
with life reserves representing 67% of total technical reserves at end-2011.
In our view, MMA's asset liability management (ALM) practices remain basic
compared with peers, despite the introduction of stochastic modeling with a
value-at-risk approach. The company has not yet defined formal profitability
indicators to accurately measure performance in the life business.
We believe that MMA's operating performance is not commensurate with the
ratings. In the P/C business, MMA's net combined ratio at year-end 2011
improved to 101.5%, compared to a high 105.7% in 2010, and met our
expectations. However, its net combined ratio continues to compare negatively
with that of most players in the P/C insurance market, mostly because we think
MMA's pricing policy has historically been more aggressive than peers'. In our
view, operating performance remains poor in the life business. MMA recorded a
low, albeit positive, life technical result of EUR11 million in 2011, compared
with negative EUR28 million in 2010. In 2011, the life technical result
represented only 0.07% of MMA's mathematical reserves, which we consider weak.
On Nov. 21, 2012, Standard & Poor's Ratings Services placed its 'A-' insurer
financial strength and counterparty credit ratings on MMA and its subsidiary
Covea Insurance Plc on CreditWatch with developing implications. For further
information, please see "MMA IARD Assurances Mutuelles 'A-' Ratings Placed On
CreditWatch Developing On Covea Restructuring News," published Nov. 21, 2012).
We aim to resolve or update the CreditWatch within the next 90 days. During
this period, we will assess the implications of the restructuring on MMA's
business and financial profiles, and in turn, on the ratings. We understand
the restructuring will be completed by year-end 2012.
We could raise, affirm, or lower the ratings on MMA, depending on our views of
the potential implications on its financial and business risk profiles. An
upgrade or a downgrade, if any, is unlikely to exceed two notches.
Related Criteria And Research
-- Interactive Ratings Methodology, April 22, 2009