Following the news of CCR RE potential acquisition by a consortium of French mutuals, S&P Global Ratings has placed its ‘A-‘ issuer credit and financial strength ratings on CCR RE, and its issue ratings on the reinsurer’s debt, on CreditWatch with positive implications.
On February 8, 2023, French-based Caisse Centrale de Reassurance entered exclusive negotiations to sell the majority of its private reinsurance subsidiary CCR RE to the consortium made up of SMABTP (A+/Stable/–) and MACSF (not rated).
The transaction, as stated by the seller, would value CCR RE at close to €1bn. It would be followed by an increase in capital of up to €200m, fully financed by the consortium. After these measures, the consortium would hold a 75% stake in CCR RE.
The rating agency expects SMABTP to be the majority shareholder of the reinsurer and to consolidate the entity in its financial accounts.
S&P believes that this transaction will benefit CCR RE’s creditworthiness, the agency stated: “We anticipate SMABTP will bring additional financial support to CCR RE, which we would reflect by one additional notch of support in our ratings on the reinsurance company.
“We believe the capital increase, as a financing resource, will support CCR RE’s growth ambitions given the hardening reinsurance market.”
The transaction is subject to final agreements and regulatory approvals. The agency expects these approvals to be granted once both sides have agreed on a deal.
“The CreditWatch placement reflects the high probability that we will raise our ratings on CCR RE after the transaction’s close, likely within the next six months, by one notch to ‘A’,” S&P explained. “This reflects that we would consider CCR RE as a strategically important subsidiary to SMABTP. Therefore, our ratings on CCR RE could benefit from up to three notches of support, capped one notch below the parent company rating.”
Although the agency believes the transaction will go ahead, it stated that if it does not proceed, it would affirm the ratings with a stable outlook.
Additionally, S&P noted that CCR RE’s exposure to governance and social risk factors is in line with that of global and regional reinsurance peers. Standards for corporate governance are typically high in France.
However, it considers that CCR RE is more exposed to environmental risk factors than the insurance industry average because of its exposure to natural catastrophe events, which makes the reinsurer more vulnerable to capital and earnings volatility.
