S&P Global Ratings has announced an upgrade in the issuer credit and financial strength ratings of French reinsurer CCR RE, raising them from ‘A-‘ to ‘A, following news of acquisition by SMABTP.
The rating upgrade comes in the wake of SMABTP, in partnership with MACSF, successfully acquiring a majority stake in CCR RE from Caisse Centrale de Réassurance on July 3, 2023.
As part of the transaction, SMABTP and MACSF injected €200 million into CCR RE through a capital increase. SMABTP, holding the majority share, will consolidate the reinsurer in its accounts, while Caisse Centrale de Réassurance will retain a minority share of 25%.
Additionally, the credit agency removed the ratings from CreditWatch with positive implications, indicating a stable outlook. The issue rating on CCR RE’s €300 million outstanding subordinated debt was also upgraded from ‘BBB’ to ‘BBB+’.
S&P Global Ratings now considers CCR RE a strategically important subsidiary of SMABTP. The profitable reinsurance operations of CCR RE provide valuable geographic and business diversification to SMABTP’s existing operations.
The capital infusion from the consortium will serve as a financing resource to support CCR RE’s growth ambitions in the current hardening reinsurance market, ensuring its capital adequacy remains above the ‘AAA’ level.
The rating agency expects continuity in CCR RE’s overall development strategy and risk appetite under the leadership of Bertrand Labilloy as CEO and Laurent Montador as deputy CEO, who will continue to head the reinsurer’s executive committee.
CCR RE’s rating continues to benefit from its ‘a-‘ stand-alone credit profile, reflecting a satisfactory business risk profile and a strong financial risk profile.
S&P Global Ratings previously revised CCR RE’s stand-alone credit profile to ‘a-‘ from ‘bbb+’ in a report titled “Reinsurer CCR RE Stand-Alone Credit Profile Revised To ‘a-‘ From ‘bbb+’; Ratings Affirmed At ‘A-‘; Outlook Positive,” published on January 12, 2023.
As a strategically important subsidiary of SMABTP, CCR RE’s ratings could receive up to three notches of group support, although currently, only one notch is applied. This is due to the ratings being capped one notch below those of SMABTP.
However, even if CCR RE’s stand-alone assessment were to deteriorate by up to two notches, its ratings would not be downgraded. Such a scenario could arise from a weakened capital position or lower earnings, considering unforeseen higher claims.
The stable outlook reflects the confidence of S&P Global Ratings in CCR RE’s strengthened position following its acquisition by SMABTP and the capital infusion from the consortium. As a strategically important subsidiary, CCR RE’s profitable reinsurance operations provide valuable diversification to SMABTP’s existing operations.
S&P Global Ratings anticipates that CCR RE will sustain its satisfactory level of profitability and excellent capital position in the coming years. The reinsurer’s growth ambitions, supported by the recent capital increase, are expected to be fruitful in the current hardening reinsurance market. These factors contribute to the stable outlook assigned to CCR RE.
In the downside scenario, if S&P Global Ratings were to lower the ratings on SMABTP over the next two years, the ratings on CCR RE could be downgraded by one notch. The agency highlights the correlation between the ratings of the subsidiary and those of its parent company.
Conversely, in the upside scenario, an upgrade in SMABTP’s ratings over the next two years could lead to an upgrade in CCR RE’s ratings by one notch.
