TEXT-S&P cuts Groupama ratings on coupon news

(The following statement was released by the rating agency)Overview

-- French insurer Groupama announced on Oct. 5, 2012, that it will notpay the next coupon on Oct. 22, 2012, on its junior subordinated notes issuedin 2007.

-- We are therefore lowering our issue rating on these notes to 'CC' from'B', in accordance with our criteria, and placing the ratings on CreditWatchnegative. We will further lower this issue rating to 'C' following nonpaymentof the coupon.

-- We also believe Groupama's decision heightens the group's businessrisk and financial risk, particularly its willingness and ability to paycoupons on its other hybrids.

-- We are therefore lowering our financial strength and counterpartycredit ratings on Groupama and its guaranteed entities to 'BB-' from 'BB' andour issue ratings on Groupama's other junior subordinated notes to 'CCC' from'B', and place these ratings on CreditWatch negative.

-- The CreditWatch reflects uncertainties regarding the potentiallonger-term business and financial implications of Groupama's decision to notpay the upcoming coupon on the 2007 issue.

Rating ActionOn Oct. 9, 2012, Standard & Poor's Ratings Services lowered its issue ratingon French insurer Groupama S.A.'s 2007 junior subordinated notes to 'CC' from'B'. We also lowered our issue ratings on Groupama's 2005 and 2009 juniorsubordinated notes to 'CCC' from 'B'.

At the same time, Standard & Poor's lowered its long-term counterparty creditand financial strength ratings on Groupama and its guaranteed subsidiaries to'BB-' from 'BB', and on strategically important subsidiary Groupama GAN Vie to'B+' from 'BB-'. We also lowered our long-term counterparty credit rating to'BB-' from 'BB' and affirmed our 'B' short-term counterparty credit rating onbanking subsidiary Groupama Banque. We placed all these ratings on CreditWatchwith negative implications.


The downgrade of Groupama's EUR1 billion junior subordinated notes due 2007follows Groupama's announcement on Friday, Oct. 5, 2012, that it would not payits coupon at the next interest payment date, Oct. 22, 2012. These notescontain optional payment features that allow the group to cancel couponpayments when Groupama's solvency margin is above 100%. The rating actionreflects the application of our criteria in the article "Criteria ForAssigning 'CCC+', 'CCC', 'CCC-', and 'CC' Ratings," published Oct. 1, 2012, onStandard & Poor's Global Credit Portal. We will further lower the rating onthese notes to 'C' following nonpayment on the coupon, in accordance with ourcriteria.

The downgrade of Groupama's two other junior subordinated notes issuesreflects our view that Groupama's decision to cancel the coupon increasesuncertainty regarding its willingness and ability to continue paying intereston these issues. In the same way as the 2007 note issue, these two note issuesare classified as having "intermediate" equity content according to ourcriteria and were issued in 2005 and 2009, for a total of EUR1,250 million. Theycontain optional deferral features when the solvency margin is above 100%,although we understand the next coupon payment on the 2009 notes is mandatorydue to look back provisions relating to the interest payment that took placein July 2012 on the 2005 issue. However, it is possible for the regulator toprevent payment on all issues. The next coupon payment dates on Groupama's2009 and 2005 notes are respectively Oct. 29, 2012, and July 6, 2013.

The downgrade of Groupama reflects our belief that Groupama's decision tocancel the coupon payment on the 2007 issue is likely to adversely affectGroupama's financial flexibility, albeit partly offset by the relatively smallpositive impact on the group's solvency margin and liquidity saving. We alsobelieve Groupama's decision could adversely affect the group's businessfranchise in terms of non-life client retention and life policy persistency.


The CreditWatch placement reflects the uncertainty about the potential impactof Groupama's decision on the group's creditworthiness. In particular, we willassess the potential longer term benefits and costs associated with Groupama'sdecision, including the potential impact on the group's business and financialprofile. In addition, we will assess the progress Groupama is making toimprove its solvency position. We aim to resolve or update the CreditWatchaction over the next 90 days.

We could potentially lower the long-term ratings on Groupama to the 'B'category if our assessment indicated a weaker business risk and/or financialrisk profile than we currently expect. Our rating on its 2007 juniorsubordinated issue will be lowered to 'C' following the nonpayment of thecoupon on the Oct. 22, 2012, interest payment date. Our ratings on its othertwo junior subordinated issues would be lowered to 'CC' if management notifiesinvestors that coupons on these instruments will also be deferred.

Related Criteria And Research

-- Interactive Ratings Methodology, April 22, 2009

-- Hybrid Capital Handbook: September 2008 Edition, Sept. 15, 2008

-- Criteria For Assigning 'CCC+', 'CCC', 'CCC-', and 'CC' Ratings, Oct.1, 2012

Ratings ListDowngraded; CreditWatch ActionTo FromGroupama S.A.Counterparty Credit Rating BB-/Watch Neg/-- BB/Negative/--Financial Strength Rating BB-/Watch Neg/-- BB/Negative/--Groupama S.A.Junior Subordinated CC/Watch Neg BJunior Subordinated CCC/Watch Neg BGAN EurocourtageGAN AssurancesFinancial Strength Rating BB-/Watch Neg/-- BB/Negative/--Groupama GAN VieCounterparty Credit Rating B+/Watch Neg/-- BB-/Negative/--Financial Strength Rating B+/Watch Neg/-- BB-/Negative/--

Downgraded; CreditWatch Action; Ratings Affirmed

To FromGroupama BanqueCounterparty Credit Rating BB-/Watch Neg/B BB/Negative/BCertificate Of Deposit BB-/Watch Neg/B BB/B

Ratings Affirmed; CreditWatch Action

To FromGroupama BanqueCertificate Of Deposit B/Watch Neg B

Complete ratings information is available to subscribers of RatingsDirect onthe Global Credit Portal at

. All ratings affectedby this rating action can be found on Standard & Poor's public Web site at. Use the Ratings search box located in the leftcolumn.(New York Ratings Team)

((e-mail: pam.niimi@thomsonreuters.com; Reuters Messaging:pam.niimi.reuters.com@reuters.net; Tel:1-646-223-6330;))