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TEXT-Fitch cuts Groupama's ratings on coupon non-payment

(The following statement was released by the rating agency)

Oct 05 - Fitch Ratings has downgraded its ratings on the three hybrid debt instruments issued by Groupama SA from 'BB' to 'B+, 'B-' and 'CCC', respectively. All hybrid debt issued by Groupama remains on Rating Watch Negative. The agency has also downgraded Groupama S.A.'s and two of its core insurance subsidiaries, Groupama GAN Vie and GAN Assurances' Insurer Financial Strength (IFS) ratings to 'BB+' from 'BBB'. The Outlook remains Negative. The IFS rating of GAN Eurocourtage has also been downgraded to 'BB+' from 'BBB' with a Negative Rating Outlook.

The rating actions on the hybrid debt follows the disclosure by Groupama of its intention not to pay the coupon on its Undated Deeply Subordinated Notes (ISIN FR0010533414) due on 22 October for a consideration of EUR 63m, which Fitch considers as non-performance. Fitch notes Groupama has paid the most recent coupon on its Undated Senior Subordinated Notes (ISIN FR0010208751) in July although the company's Solvency 1 ratio at that time would have entitled an optional deferral. Groupama also intends to pay the next coupon on its Dated Senior Subordinated Notes (ISIN FR0010815464) due in late October 2012. The maintained RWN on the subordinated debt instruments continues to reflect Fitch's view of the risk of further coupon deferral.

The downgrade of Groupama's IFS ratings reflects Fitch concerns that the decision not to pay the coupon on its hybrid debt could negatively impact the company's reputation and that the group may face further challenges to its financial condition going forward. Fitch is also concerned that financial flexibility will diminish as the agency believes that the group's access to financial markets will become very constrained for the foreseeable future.

The key rating triggers that could result in a further downgrade include further non-payment of coupons, deterioration of the group's financial profile, especially in terms of solvency, as well as its inability to translate measures aimed at improving underwriting results into a sustainable strong performance in non-life (combined ratio near 100%) and life (new business margin near 1%).

The ratings actions are as follows: Groupama S.A. IFS rating downgraded to 'BB+' from 'BBB'; Outlook Negative Long-term IDR downgraded to 'BB' from 'BBB-'; Outlook Negative

Undated Senior Subordinated debt (ISIN FR0010208751) downgraded to 'B-' from 'BB'; maintained on RWN

Dated Senior Subordinated debt (ISIN FR0010815464) downgraded to 'B+' from 'BB'; maintained on RWN

Undated Deeply Subordinated Notes (ISIN FR0010533414) downgraded to 'CCC' from 'BB'; maintained on RWN

Groupama GAN Vie IFS rating downgraded to 'BB+' from 'BBB'; Outlook Negative GAN Assurances IFS rating downgraded to 'BB+' from 'BBB'; Outlook Negative GAN Eurocourtage IFS rating downgraded to 'BB+' from 'BBB'; Outlook Negative

((Bangalore Ratings Team, Hotline: +91 80 4135 5898 swati.ray@thomsonreuters.com,Group id:BangaloreRatings@thomsonreuters.com,Reuters Messaging: swati.ray.thomsonreuters.com@reuters.net))