TEXT-S&P revises Morocco's SCR outlook to neg

(The following statement was released by the rating agency)

Oct 12 - Overview

-- Because we consider that Moroccan reinsurer SCR has an integral link with and a critical role for the Moroccan government, we equalize our long-term ratings on the company with the long-term local currency sovereign ratings, under our criteria for government-related entities.

-- Earlier this week, we revised our outlook on Morocco to negative from stable.

-- Consequently, we are revising our outlook on SCR to negative from stable, and affirming our 'BBB' long-term local currency ratings.

-- The negative outlook on SCR mirrors that on Morocco. Rating Action

On Oct. 12, 2012, Standard & Poor's Ratings Services revised its outlook on Morocco-based reinsurer Societe Centrale de Reassurance (SCR) to negative from stable. At the same time, we affirmed the long-term local currency issuer financial strength and counterparty credit ratings on SCR at 'BBB'.


The rating action follows the similar action we took earlier this week on Morocco, mostly reflecting its weaker fiscal and external positions (see "Kingdom of Morocco Ratings Affirmed; Outlook Revised To Negative On Weaker Fiscal And External Positions," published Oct. 11, 2012).

We consider SCR to be a government-related entity (GRE). In accordance with our criteria for GREs, the rating on SCR reflects our opinion that the likelihood of timely and sufficient extraordinary government support to SCR is almost certain in the event of financial distress. Therefore, we equalize the long-term local currency ratings on SCR with that on the sovereign. We base our approach on our view of SCR's integral link with and critical role for the government.

Our base-case assumptions factor in our view that SCR will continue to play a critical role for the Moroccan government after the gradual end of legal cessions under the catastrophe risks scheme. Furthermore, we believe that SCR's link to the government will remain unaltered over the next two years, and that the current guarantee will remain in place.

We could revise our assessment on SCR's GRE status if developments deviate materially from our expectations. We could also change our opinion if international business becomes more prominent, for instance, if it exceeds one-third of SCR's gross written premiums.

We continue to view SCR as having a good stand-alone credit profile (SACP). Our assessment reflects our view of SCR's good capitalization and operating performance, which are partly offset by the reinsurer's concentration on a single market, relatively high exposure to market and credit risks, and high cost of guarantee and stringent dividend policy.

We could revise our assessment of SCR's SACP if it becomes apparent that its new strategic direction would likely weaken its current competitive position, capital adequacy, or operating performance.


The negative outlook on SCR reflects that on Morocco. In application of our GRE rating methodology, any movement in the long-term local currency sovereign rating on Morocco would trigger a similar change in the rating on SCR.

Related Criteria And Research -- Use Of CreditWatch And Outlooks, Sept. 14, 2009

-- Rating Government-Related Entities: Methodology And Assumptions, Dec. 9, 2010

-- Interactive Ratings Methodology, April 22, 2009

-- Kingdom of Morocco Ratings Affirmed; Outlook Revised To Negative On Weaker Fiscal And External Positions, Oct. 11, 2012

Ratings List Ratings Affirmed; CreditWatch/Outlook Action To From Societe Centrale de Reassurance Counterparty Credit Rating Local Currency BBB/Negative/-- BBB/Stable/-- Financial Strength Rating Local Currency BBB/Negative/-- BBB/Stable/-- ((Bangalore Ratings Team, Hotline:+91 80 4135 5898 Jyothsna.BN@thomsonreuters.com, Group id: BangaloreRatings@thomsonreuters.com, Reuters Messaging: Jyothsna.BN.thomsonreuters.com@reuters.net))