S&P places Groupama's BBB rating on negative watch

Standard and Poor’s has today placed Groupama and its subsidiaries on negative watch over the possible weakening of its financial profile.

S&P said Groupama’s financial profile and regulatory solvency may be weakening on the back of highly adverse capital markets.

The US-based agency has warned the French mutual that it may downgrade its ratings by two notches.

The note says it has placed the ‘BBB’ long-term ratings on CreditWatch with negative implications. BB+ hybrid ratings are placed on CreditWatch with negative implications.

Groupama has been told that S&P will make a decision as soon as next week, once it has reassessed the elements supporting Groupama’s ratings.

Groupama’s banking arm, Groupama Banque, has had its long and short-term BBB-/A-3 counterplay credit ratings placed on negative watch.

The statement said: “The CreditWatch placement reflects our view that Groupama’s financial profile and regulatory solvency may be weakening further on the back of highly adverse financial markets to a level where they are no longer commensurate with ‘BBB’ ratings.

“In particular, we expect the 50% impairment on all of Groupama’s Greek government bonds, which represented 7.8% of the group’s shareholder funds on June 30, 2011, to further weaken the insurer’s solvency.

“We also expect significant impairments on Groupama’s significant equity exposures to financial institutions, such as Société Générale (A+/Watch Neg/A-1).

“Standard & Poor’s expects to update or resolve the CreditWatch placement next week, once we have reassessed the elements supporting Groupama’s ratings.

“We are assessing the execution risk and impact on regulatory solvency associated with the rollout of management’s strategic action plan to restore regulatory solvency.

“In particular, we will assess the likelihood of the completion of the negotiations for the acquisition by Caisses des Dépôts Et Consignations (CDC) group of Groupama’s stake in Société Immobilière de Location pour l’Industrie et le Commerce (SILIC) as announced recently by Groupama on Dec. 4, 2011.

“We may lower Groupama’s ratings by up to two notches, which could be the case if we consider that these negotiations are unlikely to be completed in the short term.

“Should the ratings on Groupama be lowered by two notches, we would also widen the notching on Groupama’s hybrid securities to a minimum of three notches below its ratings. We may decide to increase that further if we perceive that interest payment deferral risk has heightened.”