Our downgrades of the core operating entities of AXA Group, including AXA Life
Insurance, are based on our view that unfavorable investment market conditions
and weak economic prospects are likely to dampen the group's earnings growth
prospects, despite its actions to deemphasize capital-consuming products and
business lines. The group's risk-adjusted capital adequacy level, according to
our criteria, and its sensitivity to changing market conditions continue to be
weaknesses for the financial strength ratings, although we believe earnings
retention and recently improving investment market conditions have provided
capital adequacy support over the past year. On Dec. 18, 2012, we lowered the
long- and short-term counterparty ratings on parent AXA and holding entity AXA
Financial Inc. to 'A-/A-2' from 'A/A-1', and downgraded AXA Group's core
subsidiaries--except for AXA Life Insurance--to 'A+' from 'AA-' (for more
details, please see "Research Update: Global Multiline Insurer AXA Group
Ratings Lowered To 'A+' On Pressure On Capital Adequacy; Outlook Stable,"
published Dec.18, 2012).
The stable outlook on our ratings on AXA Life Insurance is equivalent to that
on the other core subsidiaries within AXA Group. The stable outlook reflects
our opinion that the 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 may lower the ratings on AXA Life Insurance if we downgrade the core
subsidiaries within AXA Group. We may downgrade the core subsidiaries if the
group does not meet our base-case earnings projections or if its risk-adjusted
capital adequacy level, based on our criteria, fails to continue to strengthen
over the next year or two.
Conversely, we may upgrade AXA Life Insurance if we raise the ratings on the
core subsidiaries within AXA Group. We could upgrade the core subsidiaries if
the group exceeded our base-case earnings projections and if we were to
witness a pronounced and sustainable improvement in its risk-adjusted capital
adequacy, particularly if that improvement is achieved through earnings
retention or controlled capital requirements. However, the ratings on AXA Life
Insurance are also constrained by our sovereign ratings on Japan
(AA-/Negative/A-1+) because the insurer's asset management portfolio is
weighted relatively heavily in domestic assets, and its business is highly
dependent on the domestic market.
RELATED CRITERIA AND RESEARCH
Research Update: Global Multiline Insurer AXA Group Ratings Lowered To 'A+' On
Pressure On Capital Adequacy; Outlook Stable, Dec. 18, 2012
General: Interactive Ratings Methodology, April 22, 2009.
General: Group Methodology, April 22, 2009