Best Affirms, Withdraws Groupama Ratings

September 16, 2008

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit rating (ICR) of “a” of France’s Groupama S.A. Best also affirmed the FSR of ‘A’ (Excellent) and ICR of “a” of Groupama Vie and Groupama Transport, the debt rating of “bbb+” on the €500 million ($713 million) perpetual subordinated notes and the €750 million ($1.07 billion) subordinated notes due in 2029 and the debt rating of “bbb” on the €1.0 billion ($1.425 billion) perpetual deeply subordinated debt issued by Groupama.

Best subsequently withdrew the ratings at the companies’ request and assigned the FSR’s a category NR-4 and the ICRs and debt ratings an “nr”.

Best said its ratings on Groupama “reflect its excellent business profile in France, positive diversification strategy abroad and solid net earnings. An offsetting factor is the decline in consolidated risk-adjusted capitalization due to the current financial market environment.”

The rating agency also indicated that it “expects Groupama’s risk-adjusted capitalization to remain supportive of the rating, despite the recent acquisitions and market value adjustments resulting from an increase in interest rates and a decline in share prices.

“Groupama’s combined net income decreased in the first half of 2008 to €327 million ($465 million) from €558 million ($793.million) in 2007. The 21 percent decrease, excluding exceptional realized gains from the disposal of SCOR shares, is due to lower realized gains on equity and unrealized losses in trading investments impacting the profit and loss accounts. Business operating profit at €256 million ($364 million) was up by 22 percent thanks to increasing technical results on life and health coming from higher margins in protection and health business.

“Groupama’s non life underwriting performance remained stable in the first half of 2008 with a 100.4 percent combined ratio (compared to 100.7 percent in the first six months of 2007). The higher combined ratio in the international division was impacted by the recent acquisitions and lower reserve releases than last year; however, this was compensated by improved underwriting results in France due to reduced expense levels.

“In the first half of 2008, Groupama was able to maintain its leading position in the French property casualty market and to increase its market share in life and health. Non life premiums grew by 10 percent, reaching €5.5 billion ($7.8 billion) due to the 2007 acquisitions in Italy and Greece and good organic growth, whereas the French business increased by 1 percent in line with the market. Life and health gross premiums written increased by 9 percent to €4 billion ($5.7 billion) due to foreign acquisitions and a 5 percent increase in France (thanks to saving products and health), despite an overall decline in the French market.”

Source: A.M. Best –

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