London, 27 June 2012 -- Moody's Investors Service has today downgraded Caser's insurance financial strength rating (IFSR) to Ba2 from Baa1. The rating remains on review for further downgrade.

Today's action follows the weakening of the Spanish government and the Spanish banks' creditworthiness, as captured by Moody's downgrade of Spain's government bond ratings to Baa3 from A3 on 13 June 2012 and the downgrade on Spanish banks' long-term debt ratings on 25 June 2012, together with the initiations of reviews for further downgrades on both the sovereign and on most of the banks. For more details on the rationales for the sovereign downgrade and the bank downgrades, please refer to the press releases http://www.moodys.com/research/Moodys-downgrades-Spains-government-bond-rating-to-Baa3-from-A3--PR_248236.

http://www.moodys.com/research/Moodys-downgrades-Spanish-banks--PR_249316

Moody's regards Caser's credit quality as being linked to that of the Spanish sovereign and its economy. Typically, Moody's considers that an insurer's key credit fundamentals (asset quality, capitalisation, profitability and financial flexibility) are correlated with -- and thus linked to -- the economic and market conditions in the countries where they operate.

Caser is the 8th largest Spanish insurance group, owned by 32 Spanish saving banks , which collectively own around 80% of the company, and by two French mutuals (MMA and MAAF). Caser has a meaningful indirect and direct exposure to Spanish saving banks, namely through its ownership, its high reliance on the saving banks' distribution network to sell insurance products, and a significant exposure to saving banks' debts and deposits.

RATINGS RATIONALE

The downgrade of Caser mainly reflects its significant investment exposure to Spanish saving banks, which weighs on its asset quality and capitalisation. Moody's sees Caser's rating as constrained by the ratings of Spanish saving banks, with the majority of the saving banks now rated in the Ba range, down from the Baa range. Furthermore, we also believe that the ongoing restructuring and consolidation of Spanish saving banks will likely weaken Caser's long-term franchise given the company's high reliance on its owner banks for distribution. In addition, the downgrade reflects Caser's exposure to Spanish sovereign risk, given that all its business is sourced from Spain and that the majority of its investments are Spanish, with a large concentration risk in Spanish government and other investments.

Moody's notes that Caser has delivered a strong track record of profitability despite the difficult economic environment in Spain with a return on capital consistently above 9% in recent years and a low-risk business profile. At year-end 2011, Caser continued to report strong results, with gross premiums of EUR2,797million, up 8% year-on-year, and a net income of EUR116million, up over 25% year-on-year, reflecting new exclusive bancassurance agreements and a sound underwriting profitability. Shareholders' equity rose by around 30% to EUR1,239million (year-end 2010: EUR 956million) driven by the strong results and the EUR50million right issue subscribed by some of their shareholders, which more than offset higher unrealised investment losses. However, this strong profitability is more than offset by the asset quality, capitalisation and distribution pressures cited above.

RATING REVIEW

Moody's rating review for Caser reflects the similar reviews at both the owner Spanish savings banks and the Spanish sovereign. Any downgrade of the owner banks would in particular likely put further pressure on Caser's rating.

WHAT COULD MOVE THE RATINGS UP/DOWN

Moody's says that an upgrade of the IFSRs is unlikely at the moment given the review for downgrade placement.

Downwards pressure on the IFSRs could develop following (i) a further downgrade of Spanish sovereign bonds or Spanish saving banks, which would deteriorate the group's asset quality and capitalisation; (ii) material deterioration in the solvency due to a disruptive event such as a significant decline in investment markets; and/or (iii) significant deterioration in the group's operating performance with a combined ratio consistently above 100% and returns on capital below 4%.

RATINGS AFFECTED

The following rating was downgraded and remain on review for further downgrade:

Caser S.A.- insurance financial strength rating to Ba2 from Baa1, on review for further downgrade.

Headquartered in Madrid, Spain, CASER is the eight largest insurance group in Spain, with a market share of approximately 4.7% at year-end 2011. It offers an extensive range of life, non-life and pension products, distributing its products mostly through Spanish savings banks. CASER reported consolidated gross premiums written of EUR2,797 million, and Shareholders' Equity (including minority interests and valuation reserves) of EUR1,239 million at year-end 2011.

METHODOLOGIES USED

The methodologies used in this rating were Moody's Global Rating Methodology for Property and Casualty Insurers published in May 2010, and Moody's Global Rating Methodology for Life Insurers published in May 2010. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

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Laura Perez Martinez Analyst Financial Institutions GroupOne Canada SquareCanary WharfLondon E14 5FA United KingdomSimon Harris MD - Financial Institutions Financial Institutions Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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