Rating action

Scope Ratings GmbH (Scope) has today assigned long-term issuer and senior unsecured debt ratings of AA- in local and foreign currency to “Union nationale interprofessionnelle pour l'emploi dans l'industrie et le commerce” (Unédic, or the organisation). Scope has also assigned short-term issuer ratings of S-1+ in both local and foreign currency. All Outlooks are Stable.

The AA-/Stable issuer rating for Unédic, reflects the following key drivers:

• Integration with the public sponsor: Unédic’s credit quality reflects strong integration with its public sponsor, the French Republic (AA-/Stable), resulting from: i) a highly strategic mandate of managing the mandatory private-sector unemployment insurance scheme, limiting the impact of economic cycles on the labour force, while supporting the French government’s employment policies; ii) substantial and regular public funding flows, among which highly protected revenues alongside a sovereign guarantee framework. As a government related entity (GRE), Unédic plays a critical role in France’s welfare system.
   
• Control, regular support and likelihood of exceptional support: Unédic’s credit quality benefits from the government’s highly strategic role in the unemployment insurance scheme through the negotiation framework, the tri-partite convention with France Travail, and the sovereign guarantee framework. The operators to which Unédic delegates the collection of social contributions and the payment of benefits are under the supervision of the Ministry of Economy and Finance, the Ministry for Solidarity and Health, and the Ministry of Labour. By ensuring the financial sustainability of private-sector unemployment insurance, Unédic’s role substantially raises the likelihood that the French government would provide exceptional support in the unlikely scenario of financial distress.
   
• Stand-alone fundamentals: Unédic’s business risk profile is underpinned by a robust funding model, whereby revenue streams are primarily made up of earmarked revenues that are protected by law. Multi-year orientations included by the French government in the framework agreement negotiated by social partners support revenue predictability. Unédic’s financial risk profile benefits from moderate funding costs based on its excellent market access underpinned by the sovereign guarantee, as well as conservative financial and debt management practices.

Key Rating Drivers

The first driver of the AA- rating is the robust integration of Unédic with its public sponsor, the French Republic, which underpins Scope’s adoption of the ‘top-down’ approach to assign the ratings.

Established in 1958, Unédic is a non-profit organisation mandated by the French State to manage the private-sector unemployment insurance system on behalf of social partners. Relations between the French government, Unédic and France Travail are regulated by a tri-partite agreement. Unédic is part of social protection bodies, and its financial debt is consolidated into that of the general government, within social security funds.

Unédic’s core mandate is to manage the compulsory unemployment insurance for private-sector workers. It plays a critical role by securing the payment of replacement income to jobseekers, providing legal analysis supporting the negotiations, drafting and implementing unemployment insurance rules, and contributing to strategic decision-making and public debate through independent studies. Unédic also contributes to the financing of France Travail, supplementary pension points for jobseekers and the compensation paid to employers for partial unemployment activity. The importance of Unédic as a preeminent socio-economic shock-absorber was further highlighted during the Covid-19 pandemic.

Unédic has wide-ranging financial interdependencies with the French State. Its revenues are approved by the government and parliament through the annual budget and social security finance act. The organisation benefits from a large and predictable revenue base, primarily derived from mandatory labour force contributions and CSG on activity income. Unédic also receives contributions collected by the tax administration on capital income. Unédic delegates to France Travail the payment of benefits and allowances to jobseekers. Finally, Unédic benefits from an explicit guarantee from the French Republic on its long-term bond issuances, whose amount is negotiated as part of the annual budget.

The second driver of the AA- rating is the strong control and regular support from the French Republic, as well as the high likelihood of exceptional support for Unédic, if needed.

Given its extensive ties with the government, Scope assesses the control and regular support of the French Republic to Unédic as ‘high’.

Although social partners independently manage Unédic, the French government retains significant influence, through the definition of the negotiation framework and approval of the unemployment insurance conventions. Should social partners fail to reach an agreement, the government can take control of the unemployment insurance by issuing decrees, ensuring continuity in the levy of social contributions and the payments of replacement income. Unédic operates under the close oversight of the government, through a general economic and financial controller, and under the supervision of Court of Auditors, General Financial and Social Affairs Inspectorates, and the parliament.

Unédic is directly and fully dependent on its public sponsor to fund its operations. The organisation benefits from direct funding support channelled by public operators in charge of levying mandatory contributions, as well as a guarantee framework defined and controlled by the parliament and Ministry of Finance. Only long-term bond issuances are explicitly guaranteed by the French Republic, but all liabilities are consolidated in general government debt. Overall, Unédic’s legal framework ensures timely and consistent financial support from the French State.

Furthermore, Scope assesses the government’s willingness to provide direct financial assistance in exceptional circumstances as ‘high’, given Unédic’s high strategic importance, elevated substitution difficulties and material reputational and financial implications of a hypothetical default of Unédic for the French Republic.

Unédic has a highly strategic importance within France’s welfare state by delivering a mandatory and countercyclical policy mitigating the impact of economic cycles on the labour force. In 2020, Unédic supported 11 million employees and 3 million corporates, paying out EUR 35bn of benefits and injecting EUR 18bn into the economy. As of-end 2023, Unédic provides insurance to 6.2 million jobseekers, among which 2.7 million are eligible to receive unemployment benefits.

As Unédic plays a highly strategic role in France’s welfare state and the government’s employment policies, the French Republic is expected to intervene in the unlikely scenario of financial distress. Under a hypothetical scenario where Unédic were dissolved, the bulk of its financial liabilities would be transferred to the French State, reflecting the sovereign guarantee on long-term bonds. Unédic has a long-track record of operating in a non-competitive environment that is highly regulated and controlled by the French State, as well as a unique understanding of the labour market as managed by social partners, which significantly raises substitution difficulty.

A hypothetical default of Unédic would entail material implications for the French Republic via the sovereign guarantee framework. Such hypothetical scenario would also entail severe damage to the government and public sector agencies’ ability to access debt capital markets and would have severe social and political implications. Overall, those considerations support our assessment of a very high likelihood that the French Republic would provide to Unédic exceptional financial assistance in an adequate and timely manner, if ever needed.

This underpins our assessment of the significant ties between the credit quality of Unédic and that of its public sponsor, the French Republic, which anchors Unédic’s AA-/Stable long-term ratings.

Finally, the AA- rating considers Unédic’s robust standalone fundamentals.

Unédic benefits from a large and resilient funding base protected by law as any change requires a finance law to be prepared by the government and approved by the parliament. Any modification of the revenue base has so far been fully compensated. In 2018, the removal of the employee insurance contributions was offset by the allocation of 1.47% of the CSG levied on activity income, enabling revenues to remain on an upward trajectory. The stability of revenue streams is further anchored by the multi-year orientations included by the French government in the negotiation framework agreement negotiated by social partners and the tri-partite agreement with France Travail.

The bulk of revenues is derived from labour force contributions and a portion of the CSG levied on activity income. As per the 2025 budget, the CSG allocated to Unédic is projected at EUR 17.6bn, against an estimated EUR 17.2bn in 2024, or almost 40% of its revenues. Other resources include contributions collected by the tax administration on capital income.

Following the Covid-19 pandemic, Unédic’s financial position improved materially with a surplus of EUR 4.3bn in 2022 and EUR 1.5bn in 2023 driven by the economic rebound and very strong employment growth. After a sharp decline in 2024, Unédic expects its net income to remain close to balance in 2025 and 2026. Unédic projects a surplus of EUR 6.3bn in 2027, assuming no State levies.

Unédic’s robust financial profile is further underpinned by its excellent market access based on the explicit sovereign guarantee on its EMTN programme, which accounts for 71% of financial debt as of end-January 2025. The sovereign guarantee is expected to anchor the 2025 funding programme of EUR 4bn, up from EUR 1bn raised each year between 2022 and 2024 through social bonds.

Furthermore, Unédic maintains a strong liquidity position, with cash and cash equivalents amounting to EUR 3.7bn as of end-2023, against minimum liquidity buffers to be maintained at EUR 2.5bn from 2023 onwards. The buffers account for more than 100% of long-term government-guaranteed bonds and medium-term bonds maturing over the next ten calendar days, and 50% of short-term debt maturing over that period.

Conversative financial management is also reflected in Unédic’s financial debt exclusively issued at fixed rates and denominated in euros. The average maturity of its medium- and long-term debt has been further lengthened following the Covid-19 pandemic to ensure that bond repayments account for less than 10% of revenues. Bond issuance is capped at EUR 4bn to mitigate refinancing risks at maturity and net interest payments have so far been maintained to less than 1% of revenues.

Finally, Scope recognises Unédic’s challenges, which relate to its very high sensitivity to economic and financial conditions, as well as to regulatory changes. France’s challenging economic and fiscal outlook and the government decision to channel a significant share of revenues to employment policies, while amending the social levies on activity income, challenge the reduction of net financial debt, projected to remain at EUR 59.3bn by 2026, materially above its 2019 level (EUR 36.8bn).

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s view that risks to the ratings are balanced over the coming 12 to 18 months. The Outlook on Unédic mirrors the Outlook on the French Republic.

Upside scenario for the ratings and Outlooks is:

• Positive rating action on the French Republic.

Downside scenarios for the ratings and Outlooks are (individually or collectively):

• Negative rating action on the French Republic;
   
• Change in the legal framework, weakening integration with the public sponsor;
   
• Significant and sustained deterioration of the business and/or financial risk profile;
   
• Significantly higher share of non-guaranteed debt in total debt.

Qualitative Scorecards (QS1, QS2)

Scope applies a top-down approach (QS1) in assessing the creditworthiness of Unédic. The starting point is Scope’s estimate of the average credit quality of the public sponsor, the French Republic. This estimate is then potentially negatively adjusted based on the assessment of: i) control and regular support; and ii) likelihood of exceptional support (QS2). The approach also includes a supplementary analysis of the entity’s stand-alone fundamentals.

The adoption of the top-down approach (QS1) reflects the strong integration between Unédic and its public sponsor, the French Republic, resulting from: i) a ‘medium’ integration assessment for legal status, ii) ‘high’ integration assessment for purpose and activities; and iii) ‘high’ integration assessment for financial interdependencies.

Scope assesses control and regular government support for Unédic as ‘high’ (QS2) as a result of: i) the ‘high’ government control over its strategic and operational decision-making; ii) ‘limited’ control over its key personnel, governing and oversight bodies; and iii) ‘high’ evidence of financial support.

Scope assesses the likelihood of exceptional support to be ‘high’ (QS2), reflecting: i) a ‘high’ assessment for strategic importance for the public sponsor; ii) ‘high’ substitution difficulty; and iii) ‘high’ assessment of the socio-economic, reputational and financial default implications in the event of a hypothetical default.

The assessments under QS1 and QS2 result in an indicative rating of ‘aa-’. The supplementary analysis of stand-alone business and financial risks has not led to an adjustment of the indicative rating, resulting in Unédic’s final rating of AA-/Stable.

The results were discussed and confirmed by a rating committee.

Environment, social and governance (ESG) factors

Scope assesses environmental, social and governance factors as relevant and positive for Unédic’s credit quality, by contributing to advance the French government’s agenda on employment policies.

Unédic introduced in May 2020 its social bond framework that is in line with Social Bonds Principles of the International Capital Market Association. All the medium- to long-term funding programme was executed between 2022 and 2024 through social bonds.

Eligible expenditures are defined by the governance of the unemployment insurance scheme. A social bond committee is responsible for the governance of the framework, the allocation of proceeds, and the approval of the allocation and impact reports.

Social bonds are in line with Unédic’s public mandate to support employment against poverty and exclusion. The insurance scheme contributes also to mitigate inequalities by better compensating the loss of lower salary employees than it does for those on higher salaries. On this basis, Unédic contributes to achieving France’s sustainable development goals and 2030 agenda.

Rating committee
The main points discussed during the rating committee were: i) Unédic’s role and integration with its public sponsor; ii) control and regular support and likelihood of exceptional support; iii) business and financial risk profiles and; iv) peers comparison.

Methodology
The methodology used for these Credit Ratings and/or Outlooks, (Government Related Entities Rating Methodology, 10 December 2024), is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain and the Rated Entity.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlooks and the principal grounds on which the Credit Ratings and/or Outlooks are based. Following that review, the Credit Ratings and/or Outlooks were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlooks are UK-endorsed.
Lead analyst: Thomas Gillet, Director
Person responsible for approval of the Credit Ratings: Alvise Lennkh-Yunus, Managing Director
The Credit Ratings/Outlooks were first released by Scope Ratings on 5 March 2025.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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