Rating agency AM Best has decided to place the ratings of French state-owned reinsurer CCR RE under review, after parent company CCR said it had entered into negotiations to transfer control of the business.
If agreed, a sale of approximately 70% of CCR RE to a consortium made up of SAMBTP and MACSF would value CCR RE based on economic share equity; i.e. close to €1bn before the capital increase.
Accordingly, AM Best has placed under review with developing implications the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of the reinsurer.
Analysts noted that the current ratings of CCR reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, favourable business profile and appropriate enterprise risk management.
These ratings also consider, in the form of rating lift, the explicit unlimited guarantee provided by the Republic of France to CCR’s state-backed business.
However, it added that the negative outlook of CCR’s Long-Term ICR reflects deterioration in the creditworthiness of the Republic of France, from which CCR receives rating lift.
AM Best says it will continue to monitor the situation as new developments emerge and review any impact these might have to CCR’s credit rating fundamentals.
Rating agency S&P Global Ratings also decided to place CCR RE’s ratings under review following news of a potential sale, but says the move is likely to have positive implications for the unit.
Notably, under the proposed transaction, SMA-BTP and MACSF are expected to contribute an additional €200 million to CCR RE’s capital base, reducing CCR’s stake in the company to approximately 25%.
SMA-BTP is expected to be CCR RE’s majority shareholder when the transaction is completed, which could happen by the end of the first half of 2023, subject to regulatory approvals and workers council consultations.
The proposed transaction also includes further mechanisms for SMA-BTP and MACSF to acquire CCR’s remaining interest in CCR RE in 2026.
