Moody’s Investors Service announced that it has lowered the debt ratings of France’s AXA group to A2 from A1 for senior debt, and to A3 from A2 for subordinated and junior subordinated debt, “reflecting a revision of Moody’s notching practice for European insurance groups.” It said the outlook is now stable.
The rating agency affirmed its Aa3 insurance financial strength rating on AXA’s core operating units as well as its Prime-1 short-term debt rating for the company with a stable outlook. The downgrade of AXA’s debt ratings was due mainly to Moody’s decision to increase to two notches the notching between the group’s financial strength ratings on operating companies and AXA’s debt rating. It announced the decision last December.
Moody’s noted that it had considered the following factors in making its decisions: “(i) AXA’s superior diversification, with major operations in Western Europe, the U.S., the Asia Pacific region, and with significant operations in life and non-life insurance and in asset management. (ii) The robustness of the earnings power of some of AXA’s core operations, mitigated by the current weaker performance of some units and the impact that more volatile equity markets may continue to have on profitability. (iii) The group’s low risk profile, underpinned by high bond asset quality, sound reserving practices and the divestment or refocusing of some of its riskier activities. (iv) AXA’s diminished capital position due to weaker equity markets and its relatively high debt leverage, somewhat compensated by its prudent financial and liquidity management, as well as on-going efforts to enhance financial flexibility. (v) Finally, the fact that the group is subject to regulatory supervision on a consolidated basis was also viewed positively.”