OREANDA-NEWS. S&P Global Ratings today assigned its 'BBB-' long-term issue rating to the proposed dated subordinated resettable notes to be issued by France-based multiline insurance holding company Credit Agricole Assurances (CAA; BBB+/Stable/--). The rating on the notes is subject to our review of the final terms and conditions at issuance.

CAA is a nonoperating holding company (NOHC) that consolidates the insurers of the Credit Agricole Group. We consider CAA's main entities, Predica Prevoyance Dialogue du Credit Agricole (Predica) and Pacifica IARD (both rated A-/Stable/--) core to the Credit Agricole Group. Owing to its status as a NOHC, CAA is rated 'BBB+/Stable/--', which is one notch below the 'a-' unsupported group credit profile (GCP) of its direct parent, Credit Agricole S. A. (CASA; A/Stable/A-1). We do not factor into the long-term ratings on CAA, Predica, and Pacifica Credit Agricole Group's additional notch of loss-absorbing capacity (ALAC). Our opinion hinges principally on our view that the lack of a prescriptive resolution framework for insurance companies under their regulations prevents the bank resolution authorities from devising a resolution strategy that would encompass both banks and insurers of the same group. For more information, please refer to: "How Standard & Poor's Applied Its Government Support And ALAC Criteria To European Banks In December 2015," published Dec. 2, 2015.

We rate the notes two notches below our long-term counterparty credit rating on CAA, reflecting our methodology for rating insurance hybrid debt issues. The rating incorporates one downward notch to reflect the instruments' deferral and another notch for subordination characteristics.

The rating on the proposed notes is based on our understanding that the noteholders will be subordinated to CAA's senior creditors, and that CAA has the option of deferring interest if it has paid no dividend of any kind on ordinary or preference shares during the previous 12 months. Furthermore, interest deferral is mandatory if a solvency event has occurred, subject to, until the first call date, no dividends having been paid during the previous 12 months.

CAA can call the notes at the first call date and once a year thereafter, subject to approval from the insurance regulator. The coupon is expected to be fixed until the call date, after which it will reset every five years to the five-year mid-swap rate plus a margin. We understand that a step-up of a maximum 100 basis points would be applied to the spread implied in the fixed rate. CAA also has the option to redeem, exchange, or vary the terms of the notes under certain circumstances, such as for regulatory reasons or following rating methodology events.

We expect to classify the notes as having "intermediate equity content" under our hybrid capital criteria. We include securities of this nature, up to a maximum of 25%, in our calculation of total adjusted capital (TAC), which forms the basis of our consolidated risk-based capital analysis of insurance companies. Inclusion in TAC is subject to the bonds being considered eligible for regulatory solvency treatment and the aggregate amount of included hybrid capital not exceeding the total eligible for regulatory solvency treatment.