JPM
We are currently OW mutual French insurer Groupama, considering attractive trading levels and strong fundamentals, including
decent operating performance, strong solvency (263% as of FY15) and modest debt/capital levels. The company is well
established in France, and also has a reasonable presence in Italy, but lacks scale/presence elsewhere. While small in size the
company has good market positions in its chosen niches including agricultural insurance (no. 1), individual health (no. 1) and
local authority insurance (no. 1). In May, the company announced an intension to re-mutualise Groupama S.A. to better align
governance and strategy, and simplify group structure. While we believe Groupama warrants a ratings upgrade we believe it
will be some time before any ratings action is taken by Fitch considering the agency review of the credit and lack of an upgrade
last year. The CCAMA 6.375% sub perps are offered at an attractive yield, in our view, of 8.23% (Z-spread of 818bps)
representing compelling compensation for a less well known, but vastly improved insurer.