Best Takes Rating Actions on AXA Financial, Certain Subsidiaries

July 21, 2014

A.M. Best has revised the outlook of the issuer credit ratings (ICR) to stable from negative and affirmed the ICR of “a-” and debt ratings of New York-based AXA Financial, Inc., and has revised its outlook on the ratings to stable from negative and has affirmed the financial strength rating (FSR) of A+ (Superior) and ICR of “aa-” for its lead operating subsidiary, AXA Equitable Life Insurance Company.

Best said the “affirmation of the ratings of AXA Financial’s life subsidiaries reflects its position as a leading variable life and annuity writer and global asset manager. The ratings also reflect its strategic importance to its ultimate parent, AXA S.A. (AXA) (Paris, France), a publicly traded, worldwide leader in financial protection and wealth management.”

Best noted that the “U.S. operations represent a considerable portion of AXA’s Life & Savings global assets and revenues. AXA Financial benefits from a diversified and productive distribution model, which includes a significant ownership of AllianceBernstein (AB), one of the largest publicly traded global investment management firms. A.M. Best recognizes the completion of the sale of certain business lines to Protective Life Insurance Company in October 2013 as part of its efforts to streamline the U.S. operations.”

Best explained that the outlook revision “to stable reflects reduced concerns with AXA’s exposures to uncertainty in the euro zone and the potential impact on the U.S. operations.

“While risk-based capital is strong, AXA Financial remains exposed to equity market pressures on both sides of the balance sheet through its investment in AB and through its variable insurance products with guaranteed benefits, as well as to volatility in revenues from asset fees as a result of the changes in market values of its large separate account book of business and derivative activity.”

Best added, however that the “exposure from variable annuity guarantees is managed effectively through reinsurance and hedging programs and that the company has, in recent years, developed and introduced new and innovative products with the objective of offering a more balanced and diversified product portfolio while reducing product design risk. Additionally, general account investments consist of a well-diversified portfolio of public and private fixed maturity bonds, commercial and agricultural mortgages and other loans, equity securities and other invested assets which are considered well managed.

In conclusion Best said: “Positive rating movement is unlikely in the near to medium term. The ratings of AXA Financial’s life insurance subsidiaries benefit from its ownership by AXA; therefore, any deterioration in the financial strength of AXA would negatively impact the ratings of AXA Financial’s U.S. life insurance subsidiaries.

“A negative rating action also could occur for any one of the company’s subsidiaries if A.M. Best’s view of the strategic importance of the company to the parent changes, negative changes materialize in risk-based capital measures, or a trend of weaker operating performance develops.

Best’s report summarized the companies affected by its rating actions as follows:
The FSR of ‘A+’ (Superior) and ICR of “aa-” have been affirmed for AXA Equitable Life Insurance Company, a subsidiary of AXA Financial, Inc.

The FSR of ‘A’ (Excellent) and ICRs of “a+” have been affirmed for the following subsidiaries of AXA Financial, Inc.:
• AXA Equitable Life and Annuity Company
• U.S. Financial Life Insurance Company
• MONY Life Insurance Company of America

The FSR of B++ (Good) and ICR of “bbb” have been affirmed for AXA Corporate Solutions Life Reinsurance.

The following debt ratings have been affirmed:
AXA Financial, Inc.—
– “a-” on $350 million 7% senior unsecured debentures, due 2028
AXA Financial, Inc.—
– “AMB-1” on its commercial paper program
AXA Equitable Life Insurance Company—
– “a” on $200 million 7.7% surplus notes, due 2015

Source: A.M. Best

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