Research Update:
Global Multiline Insurer AXA Group
'A+' Ratings Affirmed On Resilient
Financial Profile; Outlook Stable
Primary Credit Analyst:
Merryleas J Rousseau, Paris +33144206729; merryleas.rousseau@standardandpoors.com
Secondary Contact:
Taos D Fudji, Milan (39) 02-72111-276; taos.fudji@standardandpoors.com
Table Of Contents
Overview
Rating Action
Rationale
Outlook
Ratings Score Snapshot
Related Criteria And Research
Ratings List
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Research Update:
Global Multiline Insurer AXA Group 'A+' Ratings
Affirmed On Resilient Financial Profile; Outlook
Stable
Overview
• France-based global multiline insurer AXA group's risk-adjusted capital
adequacy has improved faster than we expected over the past year due to
more favorable investment markets, management actions, and earnings
retention.
• We expect AXA's ongoing derisking actions and strong enterprise risk
management to maintain capital adequacy in the 'A' range, and support a
more resilient financial profile.
• We are therefore revising the anchor on the group and its core
subsidiaries to 'a+' from 'a', and affirming the 'A+' ratings.
• The stable outlook reflects our view that AXA will maintain a stable
financial risk profile, supported by strong enterprise risk management.
Rating Action
On May 26, 2014, Standard & Poor's Ratings Services affirmed its 'A+'
financial strength and issuer credit ratings on the core operating
subsidiaries of global multiline insurance group AXA. At the same time, we
affirmed the 'A-' long-term and 'A-2' short-term issuer credit rating on the
holding company, AXA.
We also affirmed the 'A' long-term and 'A-1' short-term counterparty credit
ratings on Belgium-based bank AXA Bank Europe and the 'A-1+' short-term rating
on U.S.-based AXA Equitable Life Insurance Co. We also affirmed the ratings on
all senior and subordinated debt issues.
The outlooks on all the long-term ratings remain stable.
Rationale
The affirmation follows a faster-than-expected improvement in the group's
capital adequacy over the past year, owing to more favorable investment
markets, management actions, and earnings retention. We continue to view AXA's
financial risk profile as moderately strong and its business risk profile as
very strong. The combination of these factors results in an anchor of either
'a+' or 'a' according to our criteria. We have revised the anchor for AXA to
'a+' from 'a', reflecting our opinion that the group's financial risk profile
is now more resilient, as ongoing derisking actions and strong enterprise risk
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Research Update: Global Multiline Insurer AXA Group 'A+' Ratings Affirmed On Resilient Financial Profile;
Outlook Stable
management (ERM) are likely to maintain capital adequacy in the 'A' range. We
continue to consider AXA's ERM framework as strong and a supportive factor in
our rating opinion. However, this no longer modifies our anchor up by one
notch to achieve the final rating as, under our criteria, anchors of 'a+' or
higher are not uplifted by our assessment of ERM and management.
We assess AXA's risk position as moderate and a relative weakness, despite
derisking actions. We recognize that the group is continuing to shift its
business mix away from traditional savings products and toward more protection
and health, reduce the volatility of its U.S. variable annuity book, and
control its asset-liability mismatch and equity risk. However, we consider
that its capital adequacy remains subject to a higher level of volatility
relative to global multiline peers'. In our view, AXA's exposure to higher
risk assets (including listed and private equity, hedge funds, real estate,
and speculative or unrated bonds) relative to its total adjusted capital
(TAC), its increased interest rate risk-taking since the end of 2012, and its
legacy U.S. variable annuity exposures continue to represent potential
additional sources of capital volatility. We believe the improvement in
capital adequacy to strong levels provides a greater buffer to absorb this
volatility, supporting our view that AXA's financial profile is now more
resilient. Our moderately strong capital and earnings assessment also
recognizes that the capital model results have a high reliance on weaker forms
of capital.
Outlook
The stable outlook is based on our expectation that retained earnings in
2014-2016 and controlled growth of capital requirements will support a
continued strengthening of capital adequacy in the 'A' range, according to our
risk-based capital model. This assumes no material deterioration in market
conditions compared with year-end 2013, and AXA maintaining a cautious
approach in acquisitions and a dividend payout at the lower end of the 40%-50%
range. Our view is also dependent on the group providing continued evidence of
effective ERM.
Upside scenario
We could raise the ratings on AXA if:
• We considered that the group had materially improved its risk profile by
further derisking its assets and liabilities, particularly by reducing
its exposure to legacy U.S. variable annuities and to higher volatility
investments relative to TAC, and through its continued focus on
protection-based life products;
• The group met or exceeded our expectation of capital adequacy
strengthening in the 'A' range; and
• We saw evidence of effective risk management, supporting our strong ERM
assessment.
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Research Update: Global Multiline Insurer AXA Group 'A+' Ratings Affirmed On Resilient Financial Profile;
Outlook Stable
Downside scenario
Although we consider it an unlikely scenario, we could lower the ratings if
AXA's financial profile was less resilient than we expect. This could result
from aggressive growth, a higher risk investment policy, or adverse financial
markets, combined with concerns about the effectiveness of risk management.
Ratings Score Snapshot
Financial Strength Rating
To
A+
Anchor
Business risk profile
IICRA
Competitive position
a+
Very strong
Intermediate risk
Extremely strong
a
Very strong
Intermediate risk
Extremely strong
Moderately strong
Moderately strong
Moderate risk
Strong
Moderately strong
Moderately strong
Moderate risk
Strong
Modifiers
ERM and Management
Enterprise risk management
Management and governance
Holistic analysis
0
0
Strong
Strong
0
0
0
Strong
Strong
0
Liquidity
Exceptional
Exceptional
Support
Group Support
Government support
0
0
0
0
0
0
Financial risk profile
Capital & Earnings
Risk position
Financial flexibility
From
A+
IICRA--Insurance Industry And Country Risk Assessment.
Related Criteria And Research
•
•
•
•
Group Rating Methodology, Nov. 19, 2013
Enterprise Risk Management, May 7, 2013
Insurers: Rating Methodology, May 7, 2013
Management And Governance Credit Factors For Corporate Entities And
Insurers, Nov. 13, 2012
• Refined Methodology And Assumptions For Analyzing Insurer Capital
Adequacy Using The Risk-Based Insurance Capital Model, June 7, 2010
• Use Of CreditWatch And Outlooks, Sept. 14, 2009
• Hybrid Capital Handbook: September 2008 Edition, Sept. 15, 2008
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Research Update: Global Multiline Insurer AXA Group 'A+' Ratings Affirmed On Resilient Financial Profile;
Outlook Stable
Ratings List
Ratings Affirmed
AXA
Counterparty Credit Rating
Senior Unsecured
Subordinated
Junior Subordinated
Commercial Paper
A-/Stable/A-2
ABBB
BBBA-2
AXA Assurances IARD Mutuelle (Unsolicited Ratings)
Counterparty Credit Rating
Local Currency
A+pi/--/-Financial Strength Rating
Local Currency
A+pi/--/-AXA Belgium
MONY Life Insurance Co. of America
DBV Deutsche Beamten-Versicherung AG
AXA Versicherungen AG
AXA Versicherung AG
AXA Life and Annuity Co.
AXA Lebensversicherung AG
AXA Krankenversicherung AG
AXA Insurance U.K. PLC
AXA France Vie
AXA France IARD
Counterparty Credit Rating
Local Currency
A+/Stable/--
AXA Belgium
MONY Life Insurance Co. of America
DBV Deutsche Beamten-Versicherung AG
AXA Versicherungen AG
AXA Versicherung AG
AXA Life and Annuity Co.
AXA Lebensversicherung AG
AXA Krankenversicherung AG
AXA Insurance U.K. PLC
AXA Insurance Co.
AXA France Vie
AXA France IARD
AXA Equitable Life Insurance Co.
AXA Corporate Solutions Assurance
Financial Strength Rating
Local Currency
A+/Stable/--
AXA Equitable Life Insurance Co.
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Research Update: Global Multiline Insurer AXA Group 'A+' Ratings Affirmed On Resilient Financial Profile;
Outlook Stable
Counterparty Credit Rating
Local Currency
A+/Stable/A-1+
AXA Equitable Life Insurance Co.
AXA France IARD
Financial Enhancement Rating
Local Currency
A+/--/--
AXA Financial Inc.
Counterparty Credit Rating
Local Currency
A-/Stable/--
AXA Equitable Life Insurance Co.
Subordinated
A-
AXA Financial Inc.
Senior Unsecured
Commercial Paper
AA-2
Additional Contact:
Insurance Ratings Europe; InsuranceInteractive_Europe@standardandpoors.com
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