TEXT-S&P cuts AXA group ratings to 'A+', outlook is stable

Tue Dec 18, 2012 5:13pm EST

Overview
     -- Retained earnings and recent investment market appreciation are 
reducing pressure on France-based global multiline insurer AXA group's balance 
sheet, in our opinion, but we still view its risk-adjusted capital adequacy 
level and sensitivity to market conditions as rating weaknesses. 
     -- Furthermore, uncertain investment markets, low interest rates, and the 
economic recession in the eurozone are likely to dampen the group's earnings 
growth potential and its ability to markedly strengthen capital adequacy. 
     -- Therefore, we are lowering our long-term ratings on the core insurance 
operating entities of AXA group to 'A+' from 'AA-'.
     -- The stable outlook reflects our opinion that the group's ongoing 
execution of its strategic goals is likely to strengthen earnings retention 
and risk reduction. This should in turn further alleviate the pressure on, and 
reduce the sensitivity of, the group's risk-adjusted capital adequacy over 
2013 and 2014.

Rating Action
On Dec. 18, 2012, Standard & Poor's Ratings Services lowered its counterparty 
credit and insurer financial strength ratings on the core operating entities 
of France-based composite insurer AXA group to 'A+' from 'AA-'. The outlook is 
stable. 

We also took the following actions:
     -- We lowered our long- and short-term counterparty ratings on parent AXA 
and holding entity AXA Financial Inc. to 'A-/A-2' from 'A/A-1'. 
     -- We lowered our long--term counterparty credit rating on AXA Bank 
Europe S.A. to 'A' from 'A+' and affirmed our 'A-1' short-term counterparty 
credit rating. 
     -- We lowered our issue ratings on AXA's debt, including the ratings on 
senior unsecured debt to 'A-' from 'A', subordinated debt to 'BBB' from 
'BBB+', and deeply subordinated debt to 'BBB-' from 'BBB'.

Rationale
The downgrade reflects our views that unfavorable investment market conditions 
and weak economic prospects are likely to dampen AXA group's earnings growth 
prospects, despite its actions to deemphasize capital-consuming products and 
business lines. The group's risk-adjusted capital adequacy, according to our 
criteria, and its sensitivity to changing market conditions continue to be 
weaknesses for its financial strength ratings, although we believe earnings 
retention and recently improving investment market conditions have provided 
capital adequacy support over the past year.

The sensitivity of the group's risk-adjusted capital adequacy to market 
conditions is still high, in our view, and we believe that this sensitivity is 
likely to continue weighing on the ratings. We expect, however, the group's 
capital adequacy to continue strengthening through retained earnings and 
controlled growth in capital requirements thanks to the effects of derisking 
actions. 

Our ratings remain supported by AXA group's very strong competitive position 
and very strong operating performance. In our opinion, this is supported by 
the sizeable business line and geographic diversification of the group. AXA 
group holds leading positions in mature markets and promising positions in 
developing markets. Among global multiline insurers (GMIs), the group's 
competitive position and operating earnings compare favorably in terms of 
geographic and business segment balance. This effectively translates into 
visible pricing power, as evidenced by property/casualty (P/C) underwriting 
earnings improvements over the past three years, and into product redesign 
abilities in its life and savings segment, which enables the group to tailor 
new products adapted to a challenging environment and increase its focus on 
high-margin contracts. The asset management segment performance remains 
subdued, but adds good diversification, which we view positively in assessing 
the group's overall competitive position and operating performance. 

In our base-case assumptions, we expect the group's underlying earnings to 
grow in the mid-single digits over 2013 and 2014, on the back of stable 
contributions from its major business segments, continued improvement in the 
P/C combined ratio (a measure of underwriting profitability), and steady life 
and savings margins.

We view also AXA group's management and corporate strategy as supportive for 
the rating. The group's enterprise risk management practices are "strong" 
according to our criteria. The group has consistently made strategic plans 
public and monitored their execution in light of changing operating and 
financial environments. We consider that AXA group's strategic actions, such 
as focusing on less capital consuming products and emphasizing cost and 
capital efficiency, will likely address over the long term the challenges that 
the group faces linked to its exposure to the life and savings business in 
Europe and the U.S. External factors, such as the continued recession in the 
eurozone (European Economic and Monetary Union), protracted period of low 
interest rates, and still-high potential volatility in investment markets 
might be a challenge, however. We view the group's ERM abilities as comparing 
favorably with those of other GMIs.

Outlook
The stable outlook reflects our opinion that AXA group's ongoing execution of 
its strategy is likely to lead to strengthened earnings retention and risk 
reduction. This should, in our opinion, reduce the sensitivity of its 
risk-adjusted capital adequacy over 2013 and 2014, and ultimately reinforce 
its position to a level that would sustainably support the current ratings. 

We could lower the ratings if the group didn't meet our base-case earnings 
projections or, in particular, if its risk-adjusted capital adequacy levels, 
based on our criteria, didn't continue strengthening over the next year or two.

We could raise the ratings on AXA group, all other things being equal, if it 
exceeded our earnings projections under our base case and if we witnessed a 
pronounced and sustainable improvement in risk-adjusted capital adequacy, in 
particular through earnings retention or controlled capital requirements.

Related Criteria And Research
     -- Principles Of Credit Ratings, Feb. 16, 2011
     -- Interactive Ratings Methodology, April 22, 2009
     -- Rating Government-Related Entities: Methodology And Assumptions, Dec. 
9, 2010
     -- Refined Methodology And Assumptions For Analyzing Insurer Capital 
Adequacy Using The Risk-Based Insurance Capital Model, June 7, 2010 
     -- Criteria Update: Factoring Country Risk Into Insurer Financial 
Strength Ratings, Feb 11, 2003 
     -- General Criteria: Nonsovereign Ratings That Exceed EMU Sovereign 
Ratings: Methodology And Assumptions, June 14, 2011
     -- Group Methodology, April 22, 2009
     -- Hybrid Capital Handbook: September 2008 Edition, Sept. 15, 2008
     -- Use Of CreditWatch And Outlooks, Sept. 14, 2009

Ratings List
Downgraded; Outlook Action
                                        To                 From
AXA France IARD
MONY Life Insurance Co. of America
DBV Deutsche Beamtenversicherung Lebensversicherung AG
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 Belgium
 Counterparty Credit Rating
  Local Currency                        A+/Stable/--       AA-/Negative/--

AXA France IARD
MONY Life Insurance Co. of America
MONY Life Insurance Co.
DBV Deutsche Beamtenversicherung Lebensversicherung AG
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 Equitable Life Insurance Co.
AXA Corporate Solutions Assurance
AXA Belgium
 Financial Strength Rating
  Local Currency                        A+/Stable/--       AA-/Negative/--

AXA
 Counterparty Credit Rating             A-/Stable/A-2      A/Negative/A-1

AXA Equitable Life Insurance Co.
 Counterparty Credit Rating
  Local Currency                        A+/Stable/A-1      AA-/Negative/A-1+

AXA Financial Inc.
 Counterparty Credit Rating
  Local Currency                        A-/Stable/--       A/Negative/--

Downgraded; Outlook Action; Ratings Affirmed
                                        To                 From
AXA Bank Europe S.A.
 Counterparty Credit Rating             A/Stable/A-1       A+/Negative/A-1

MONY Life Insurance Co.
 Counterparty Credit Rating
  Local Currency                        A+/Stable/--       AA-/Negative/--

Downgraded
                                        To                 From
AXA France IARD
AXA Equitable Life Insurance Co.
 Financial Enhancement Rating
  Local Currency                        A+/--/--           AA-/--/--

AXA Bank Europe S.A.
 Certificate Of Deposit                 A/A-1              A+/A-1

AXA
 Senior Unsecured                       A-                 A
 Subordinated                           BBB                BBB+
 Junior Subordinated                    BBB-               BBB
 Commercial Paper                       A-2                A-1

AXA Equitable Life Insurance Co.
 Subordinated                           A-                 A

AXA Financial Inc.
 Senior Unsecured                       A-                 A
AXA Financial Inc.
 Commercial Paper                       A-2                A-1


Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.
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