S&P Affirms ‘A-‘ Ratings on MMA, Outlook Negative

Standard & Poor’s Ratings Services said that it had affirmed its ‘A-‘ insurer financial strength and long-term counterparty credit ratings on France-based property-casualty insurer Les Mutuelles du Mans Assurances IARD (MMA), the parent and largest operating entity of the MMA group.

The outlook is negative.

“The ratings action reflects MMA’s strong franchise and strong consolidated capitalization,” said Standard & Poor’s credit analyst Emmanuelle Cales. “These strengths are offset by MMA’s operating performance, which, although gradually improving, remains relatively weak for the current rating level.”

MMA had EUR4.21 billion of gross written premiums in 2002. The group benefits from a strong franchise in the highly competitive French property/casualty and life market, thanks to its widespread tied-agent network, dynamic marketing policy, and competitive product offering. MMA ranks number nine in France, with a 6 percent market share focused on domestic individual motor and home insurance, and on small commercial lines with limited but long-term diversification in life (one-fourth of total premium income). Although significantly more dynamic than the other tied-agent insurers in the French market, MMA has, however, limited organic growth prospects in the retail markets, where it is challenged by low-cost providers–namely direct mutual insurers and bankinsurers. MMA bought Winterthur’s French life and non-life books in 2002, bringing in an additional 20 percent in premium income. MMA’s international operations, now almost entirely restricted to the U.K. through MMA Insurance PLC, are currently considered as a limited source of diversification.

“The negative outlook on MMA reflects the group’s need to significantly improve its operating performance,” added Ms. Cales. “Standard & Poor’s expects that MMA’s earnings should stabilize around EUR50 million in 2003 thanks to a reduction in equity exposure, and recover at EUR100 million in 2004.”

From a credit perspective, MMA’s planned closer ties with direct mutual MAAF, which are expected to materialize through the projected creation of a Societe de Groupe d’Assurances Mutuelles (SGAM) and the publication of MMA/MAAF combined accounts for 2003, are considered to be an element of comfort.