A.M. Best Affirms Ratings of Groupama S.A., Groupama Vie and Groupama Transport.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit rating (ICR) of "a" of Groupama S.A. (Groupama) (France). At the same time, A.M. Best has affirmed the FSR of A (Excellent) and the ICR of "a" of Groupama Vie and Groupama Transport, and the debt rating of "bbb+" on the EUR 500 million perpetual subordinated notes and the EUR 750 million subordinated notes due in 2029 issued by Groupama. The outlook for all the ratings remains stable.

The ratings of Groupama reflect its excellent consolidated risk-adjusted capitalisation, as well as its leading business position in France. A partially offsetting factor is Groupama's relatively weak performance in the non life sector.

Excellent consolidated risk-adjusted capitalisationCoA.M. Best expects Groupama's risk-adjusted capitalisation to remain excellent in 2006, factoring the anticipated growth in life, health and retail banking. Groupama's shareholders' funds are expected to improve through retained earnings at year-end 2006; however, this will be partially offset by lower revaluation reserves due to higher long-term interest rates. A.M. Best believes that Groupama's capitalisation remains sensitive to interest rate changes partly due to the long duration of its bond portfolio.

Groupama is planning to finance its ambitious acquisition plan by an initial public offering, although the timeline is uncertain.

Good overall earnings despite relatively weak non-life underwriting performanceCo A.M. Best expects Groupama's combined net income to increase slightly in 2006 to EUR 550-600 million (USD 698-762 million) (versus EUR 544 million [USD 691 million] in 2005), mainly driven by stable life earnings of approximately EUR 240-260 million (USD 305-330 million) and higher unrealised gains on hedging derivatives. Groupama's non life underwriting performance is likely to slightly improve but will remain relatively weak in 2006 with a combined ratio of approximately 101% in 2006, compared to 102.4% in 2005. A.M. Best expects that the profits from higher discount rates for existing annuity reserves are likely to be offset by deteriorating underwriting results in motor due to softening rates and increased claims for more volatile risks, such as fire and commercial lines. A.M. Best also believes that non life results continue to be adversely impacted by high expense levels, particularly in respect of Gan Assurance Iard, the tied-agents business.

Leading business positionCoIn 2006, A.M. Best believes that Groupama will maintain its position as the second-largest non-life insurer in France, despite a strong competitive environment. A.M. Best expects consolidated non-life gross premiums written to grow moderately by 2% at EUR 7.1 billion (USD 9 billion) as growth in domestic and international business is likely to be partly offset by a decline in motor rates. In health and accident, the company is likely to strengthen its leading position as it benefits from the partial shift of state-funded health cover to private insurance. As a result, A.M. Best expects gross premiums written to increase by 4%-6% to EUR 2.1 billion (USD 2.7 billion) in 2006. In the life sector, despite an anticipated increase in gross premiums written by 5%-6% to EUR 4.4 billion (USD 5.6 billion), Groupama is losing market share as overall growth rates are lower than that of its competitors.

The ratings of Groupama Vie and Groupama Transport reflect their integral role within the group. In addition, Groupama Transport benefits from a guarantee provided by Groupama.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.