Morningstar DBRS Confirms Caisse d'amortissement de la dette sociale (CADES) at AA (high), Negative Trend

DBRS Ratings GmbH (Morningstar DBRS) confirmed Caisse d'amortissement de la dette sociale (CADES) Long-Term Issuer Rating at AA (high). The trend on the Long-Term rating remains negative. At the same time, Morningstar DBRS confirmed CADES' Short-Term Issuer Rating at R-1 (high). The trend on the Short-Term rating remains Stable.

KEY CREDIT RATING CONSIDERATIONS
CADES' credit ratings and trends are aligned with those of the Republic of France (AA (high), Negative). Morningstar DBRS considers that CADES benefits from explicit support arrangements from the French government. CADES' credit ratings are underpinned by (1) the status of CADES as a national public agency ("établissement public national à caractère administratif" - EPA) created by the French State by ordinance dated 24 January 1996; (2) the ultimate responsibility of France to ensure the solvency and the liquidity of CADES; (3) the essential role of CADES for France and its social security system; CADES benefits from a specific pledge of resources and is explicitly authorised to borrow in order to ensure the long-term funding of the cumulated deficits of the French social security system; and (4) the ability of France to support CADES in a timely manner if ever needed, primarily through the French Treasury Agency ("Agence France Trésor" - AFT) but also potentially through the State government debt fund ("Caisse de la dette publique" - CDP). Morningstar DBRS views the French government commitment towards CADES as credible, thanks to the strong institutional environment in France.

CREDIT RATING DRIVERS
CADES' credit ratings could be downgraded if any or a combination of the following occur: (1) the French sovereign credit rating is downgraded; or (2) a change in the status of CADES translates into a weakening of the ultimate responsibility of the French State regarding its solvency and liquidity. CADES' long-term credit rating could be upgraded if France's long-term credit rating is upgraded. The trend on CADES' Long-Term Issuer Rating could return to Stable if the trend on France's Long-Term Issuer Ratings returns to Stable.

CREDIT RATING RATIONALE

CADES, Pillar of the French Social Protection System, has seen its Essential Role for the State Revived Since the COVID-19 Outbreak

The financing of the French social protection system, partly through recourse to financial markets, is notably organised around three large entities: Agence centrale des organismes de sécurité sociale (ACOSS) and CADES regarding the social security per se and Unedic which manages the unemployment insurance scheme. ACOSS is principally in charge of ensuring the centralised treasury management of the national funds in charge of the social security's general scheme (SSGS), by covering the short-term funding needs of the system. CADES' mission is therefore to refinance long-term and repay the debt accumulated by the SSGS and the Elderly Solidarity Fund ("Fonds de Solidarité Vieillesse" - FSV). This debt is transferred to CADES by ACOSS following the French State's decisions. This critical role of CADES has been confirmed and strengthened by the sharp increase of the financing needs of the French social security due to the Coronavirus Disease (COVID-19) outbreak. Indeed, the balance of the SSGS and FSV reached its highest historical deficit in 2020 at EUR 38.7 billion. Thanks to the strong recovery of the French economy in 2021 and the favorable situation of the labor market in recent years, the deficit gradually decreased to reach EUR 19.7 billion in 2022. However, despite the almost full wind-down of COVID-19 related healthcare expenditure in 2023, the deficit remained high at EUR 10.8 billion. The deficit of the SSGS and FSV increased again in 2024 to EUR 15.3 billion, mainly driven by delayed effects of inflation on expenditure including the pensions indexation. This is much higher than its pre-COVID-19 pandemic level, standing at almost balance in 2018 and 2019, following a decade of continuous improvement. According to the June 2025 report of the Social Security Commission, the deficit will increase further to EUR 21.9 billion this year.

The State is Ultimately Responsible for CADES' Solvency and Liquidity

Given the EPA status of CADES, Morningstar DBRS considers that the Republic of France is ultimately responsible for its solvency. In case of dissolution, CADES' assets and liabilities would revert back to the French State or another government-related entity. On top of the common framework applicable to national public agencies, CADES benefits from supplementary legal protection which ensures it a complementary commitment from the State, as per article 7 of the ordinance of 24 January 1996. If CADES was not able to honor all of its commitments, it would be granted new resources, probably with a tax base as resilient as the one of its current revenues, the CRDS (Contribution dedicated to the Repayment of Social Debt) and the CSG (General Social Contribution). Moreover, Morningstar DBRS considers that the Republic of France would intervene in a timely manner to support CADES in order to avoid any reputational risk for other EPAs and its own creditworthiness.

CADES is under Central Government Supervision and Benefits from a Dynamic and Diversified Debt and Liquidity Management

CADES' governance is under the central government's supervision via the Ministry Finance and the Ministry in charge of Social Security. CADES' borrowings are subject to the approval of the Ministry in charge of Economy and Finance. For 2025, CADES is planning an annual medium- and long-term borrowing program of EUR 10 billion, versus EUR 18.1 billion in 2024, EUR 22.2 billion in 2023 and EUR 38.1 billion in 2022. The gradual drop in the borrowing program is mainly due to the decrease in the amount of social debt to be taken over by CADES to EUR 8.8 billion in 2024 from EUR 27.2 billion in 2023 and EUR 40 billion in 2022. As of end of May 2025, CADES had already executed three-quarters of its annual medium- and long-term borrowing program for this year. Morningstar DBRS believes that CADES' access to diversified sources of funding, including through its social bond framework put in place in 2020, but also the pooling of its operational services with those of AFT, allow for a dynamic and diversified debt and liquidity management with a strong access to financial markets. This should help CADES cover its funding needs in the best financial conditions.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

Credit rating actions on France are likely to have an impact on this credit rating. ESG factors and their effect on the credit analysis of France are discussed separately at https://dbrs.morningstar.com/issuers/14372

There were no Environmental, Social or Governance factors had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (16 May 2025) https://dbrs.morningstar.com/research/454196

RATING COMMITTEE SUMMARY

The main points discussed during the Rating Committee include the relationship between the French central government and CADES, CADES' financial performance, the Social Security Financing Bill for 2025, CADES' 2024 funding results and CADES' 2025 funding strategy.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology is the Global Methodology for Rating Government Related Entities (2 June 2025) https://dbrs.morningstar.com/research/455464. In addition Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings https://dbrs.morningstar.com/research/454196 in its consideration of ESG factors.

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

The sources of information used for these credit ratings include the analytical information provided by CADES, CADES' May 2025 Investor Presentation, CADES' 2019-2024 annual reports, annual reports of the Social Security Commission for 2012-2025, Social Security Financing Bills for 2021-2025 and the 2025 report of the National Court of Audit on the social security. Morningstar DBRS considers the information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

Morningstar DBRS does not audit the information it receives in connection with the credit rating process, and it does not and cannot independently verify that information in every instance.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' outlooks and credit ratings are under regular surveillance.

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

The sensitivity analysis of the relevant key credit rating assumptions can be found at: https://www.dbrsmorningstar.com/research/457852.

These credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Max Dietz, Assistant Vice President
Rating Committee Chair: Nichola James, Managing Director, Global Sovereign Ratings
Initial Rating Date: 23 July 2021
Last Rating Date: 26 March 2025

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