Moody’s Affirms AXA’s Ratings; Outlook Stable

Moody’s Investors Service announced that it has affirmed AXA’s debt ratings (senior at A2), as well as the Aa3 insurance financial strength ratings of AXA’s main operating subsidiaries with a stable outlook.

The report noted that “the group’s refocusing and rationalization efforts deployed in recent years have contributed to leveraging AXA’s global insurance franchise, translating into enhanced earnings stability and financial strength.” The rating agency commented that its stable rating outlook on the insurance financial strength ratings of the group’s core operating units (AXA France, AXA Financial in the U.S., AXA UK, AXA Germany and AXA Belgium) reflects “their leading positions in their respective markets, sound economic solvency and reserving practices, and their prospects for stable or improved underlying financial performance.”

Moody’s noted: “These ratings also remain underpinned by strong management, superior diversification and distribution, and improved property and casualty combined ratios.” It also highlighted “the recovery seen in the profitability of business units which are no longer besetting the group’s overall profits.

“In life insurance, the group is mitigating the pressure created on its financial margin by a low interest rate environment by an improved product-mix, advanced asset-liability management and higher cost efficiency.

“On the other hand, Moody’s said that the rating outlook on AXA’s Dutch operations (AXA Leven and AXA Schade) “remains negative reflecting comparatively less strong fundamentals on a stand-alone basis and a less advantaged competitive positioning than the group’s other operations.”

In more general terms Moody’s cited AXA’s “prudent capital management, low risk profile, and improved operating earnings. In addition, whilst AXA’s core indebtedness remains material, stronger capital formation has enabled the group to lower its financial leverage, whereas ample liquidity and prudent debt management provide good debt protection measures to the group’s creditors. The recent issuance of long dated and deeply subordinated debt further demonstrate AXA’s financial flexibility.”

Moody’s also pointed to the positive trend seen in AXA’s operating earnings power and its lower reliance on capital gains and lower asset impairments. “The group’s solvency and financial flexibility have also recovered on the back of more stable equity markets, reallocation of capital to lower risk activities, debt reduction and improved capital formation,” the bulletin continued.

Tempering the group’s strengths, Moody’s said that AXA’s major challenge will be “to accelerate its sales momentum by leveraging its operational and distribution strengths despite its lack of strong bancassurance links in Europe, and to achieve further cost efficiencies.

“Moody’s concluded that AXA remains well positioned to continue to expand its global insurance franchise, and expected the group to maintain its conservative stance in the management of its capital structure, which has benefited from higher retained earnings and more moderate financial leverage.”