S&P Affirms Groupama ‘A’ Ratings

November 1, 2002

Standard & Poor’s Ratings Services announced that it has affirmed its single-‘A’ long-term insurer financial strength and counterparty credit ratings on the French mutual insurance group Caisse Centrale des Assurances Mutuelles Agricoles (CCAMA) and related entities, together known as “Groupama,” following an annual review. The outlook is stable. It also affirmed an ‘A-‘ rating on Groupama Banque’, the group’s banking subsidiary.

“The ratings are based on Groupama’s very strong and resilient capitalization, strong business position, and recovering operating performance,” stated Yann Le Pallec, a credit analyst and director in S&P’s Insurance group. The bulletin indicated that “Groupama’s premium income is expected to grow by approximately 5% per year in the medium term, mainly driven by rate increases in property-casualty and good resilience in life sales.” Le Pallec said that over a longer term the banking operation was expected to improve and strengthen.

S&P noted that “The group is the largest property-casualty insurer in France, with 8 million clients served mainly through proprietary distribution channels, including Groupama branches and the GAN-tied agent network.” It is weaker, said S&P, in the life sector, and has undertaken only limited global expansion.

“While Groupama is more a second-tier player in life insurance, it is nevertheless clearly positioning itself as a global financial services provider in its home market and is therefore expected to expand sales from its existing client base both in life insurance (Groupama Vie, GAN Vie) and in retail banking (Groupama Banque). International diversification is limited to 16% of EUR11.3 billion total premium income,” said the announcement.

The report noted that Groupama was still recovering from the losses caused by the devastating 1999 windstorms, but had posted an adjusted return on equity of 8.4% in 2001, up from 5.8% in 2000. S&P observed that “Underlying combined ratios in property-casualty in France (109%) are increasingly being brought into line with the market average.”

The Group is also less dependent on capital gains to contribute to earnings, and its “capitalization is very strong and has proved resilient.” S&P said it expected it “to remain comfortably in the high ‘A’ range over time (i.e. in excess of 140%),” and added that “Groupama’s highly retail-oriented risk profile–outside Groupama Transports–brings stability to its risk-based capital adequacy score.”

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