PRESS RELEASE:Fitch Cuts La Mondiale To IFS A;Outlook Now Negative
Friday December 19th, 2008 / 11h36
Fitch Ratings-Paris/London-19 December 2008: Fitch Ratings has today downgraded the French mutual insurance company La Mondiale's Insurer Financial Strength (IFS) rating to 'A' from 'A+', its Long-term Issuer Default (IDR) rating to 'A-' (A minus) from 'A' and its subordinated debt rating to 'BBB+' from 'A-' (A minus). The Outlooks for La Mondiale's IFS and Long-term IDR ratings have been changed to Negative from Stable.
The downgrade reflects the decline in the group's capital adequacy and profitability due to the deterioration in financial markets over the past year, leaving the group with reduced financial flexibility. The Negative Outlook reflects Fitch's view of a potential further decline in the group's capital strength in a still challenging financial environment and concerns over the ability of La Mondiale to rebuild its capital base via retained earnings.
Fitch notes that the creation of a common mutual insurance entity with the provident institution, AG2R Prevoyance, has allowed the two groups to implement business and organisational co-operations. However, any business and risk diversification benefits to La Mondiale are only likely to materialise over the medium term. This partnership has had a limited impact on the group's financial strength as the financial support arrangement agreed between the two groups has been capped at a reasonable level compared with La Mondiale's surplus and as a result is considered manageable by Fitch.
During the past five years, La Mondiale's gross written premiums have grown by more than 8% a year on average to reach EUR5.3bn in 2007. The group's market share stabilised at around 4% in 2007, ranking it among the top-10 providers of French life and benefits products. Lapse ratios remain low by industry standards.
The Outlooks could revert to Stable if La Mondiale demonstrates its ability to rebuild capital strength to a level in line with the 'A' range. Conversely, the ratings would be downgraded if La Mondiale is unable to restore its capital base to a level compatible with its current ratings or if the financial environment deteriorates further, leading to additional unrealised capital losses.
The ratings of La Mondiale continue to reflect the insurer's good position as a leading player in the specialist fields of retirement products and investment life insurance in France. They also reflect the quality and conservatism of its management, which is pursuing a consistent strategy and its consistent investment strategy.
Formed in 1905, La Mondiale is a mutual company providing life insurance products via three key business units: "Experts" (salaried agents), "ARIAL Assurance" (50/50 joint venture with AG2R dedicated to corporate clients) and "Partenaire" (partnership distribution agreements with intermediaries in the high-net-worth individual segment). In 2007, the group was the top two French insurers in group retirement products and was the second largest provider of 'Madelin' retirement products (designed for the self-employed and carry significant tax advantages for policyholders).
CONTACT: Vanessa Andre, Paris, Tel : +33 1 44 29 91 42 ; Marc-Philippe Juilliard, +33 1 44 29 91 37.
Media Relations: Francoise Alos, Paris, Tel: +33 1 44 29 91 22, Email: francoise.alos@fitchratings.com; Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364, Email: peter.fitzpatrick@fitchratings.com.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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