(The following statement was released by the rating agency)
Oct 09 -
-- France-based insurer CNP Assurances plans to issue undated, rate resettable, and callable junior subordinated notes.
-- We are assigning an 'A-' issue rating to the proposed notes.
-- We expect to classify the notes as having "intermediate equity content" according to our hybrid capital criteria.
Standard & Poor's Ratings Services said today that it assigned its 'A-' long-term issue rating to the proposed $500 million undated notes to be issued by French insurer CNP Assurances (A+/Negative/--). The rating on the notes is subject to confirmation, following our receipt and review of the final terms and conditions.
The rating is two notches below our counterparty credit rating on CNP, reflecting our standard notching for junior subordinated debt issues. We have analyzed and rated the proposed debt issue on the understanding that, when issued, the notes will be subordinated to debt held by senior creditors.
We expect to classify the notes as "intermediate equity content" under our hybrid capital criteria, and would confirm this following our review of the final terms. We include securities such as these in total adjusted capital (TAC) up to a maximum of 25% of TAC, which is our measure of available capital in our consolidated risk-based capital analysis of insurance companies. Under our criteria, the notes can only be included if they are also considered eligible for regulatory solvency treatment and the aggregate amount of included notes does not exceed the total amount eligible for regulatory solvency treatment.
We understand that the notes contain interest deferral provisions that enable CNP to optionally defer coupons at any time, unless the issuer has declared or paid dividends during the six months before the interest payment date. CNP can call the junior subordinated notes after six years, in October 2018, and on any coupon date thereafter, subject to approval from its regulator. Initially, CNP will pay a fixed coupon for six years, after which the coupon will be reset every six years. A step-up of 100 basis points would apply at the second reset date (October 2024).
We understand that CNP plans to issue these notes to strengthen its regulatory solvency margin, which was 183% including unrealized gains and 113% excluding these gains at June 30, 2012.
RELATED CRITERIA AND RESEARCH
All articles listed below are available on RatingsDirect on the Global Credit Portal.
-- Implications Of Solvency II Proposals For Our European Insurance Hybrid Criteria, March 4, 2010
-- Methodology: Hybrid Capital Issue Features: Update On Dividend Stoppers, Look-Backs, And Pushers, Feb. 10, 2010
-- Clarification Of The Equity Content Categories Used For Bank And Insurance Hybrid Instruments With Restricted Ability To Defer Payments, Feb. 9, 2010
-- Criteria Assumptions Regarding Coupon Step-Ups In Equity Hybrids Issued By Banks And Insurers, Sept. 16, 2009
-- Hybrid Capital Handbook: September 2008 Edition, Sept. 15, 2008