Standard & Poor’s recently made announcements affirming the credit ratings of the French and U.K. insurers as follows:
AXA – The report on France’s AXA Group affirmed its extremely strong financial position – Double A for both counterparty credit and insurer financial strength.
S&P reviewed the ratings in reference to the announced intention of Alliance capital, an AXA subsidiary, to buy Sanford C. Bernstein & Co. No rating changes were made, and the outlook on all the AXA entities remains stable.
After noting that Alliance would issue new units and make a $1.5 billion cash payment for Bernstein, S& P indicated that, “Funding of the cash payment is unlikely to have a significant impact on the AXA Group’s gearing and fixed-charge coverage, which are roughly 15% and 8 times, respectively, and are consistent with the AA rating category.”
Groupama – Ratings on the parent company, Caisse Centrale des Assurances Mutuelles Agricoles, and the main subsidiaries, while retaining their single A rating for their counterparty credit and insurer financial strength, saw the outlook downgraded from stable to negative.
S& P made the change largely do to the losses Groupama has suffered following last December’s disastrous windstorms in France. Net income dropped from Frs. 905 million ($ 130 million) in 1998 to Frs. 169 million ($24.5 million) in 1999.
S&P cited additional reasons for its actions. “Excluding the December weather-related losses, the group’s total net profits would have reached FFr 1.4 billion ($200 million) in 1999, but GAN’s [a recently acquired insurance group] nonlife operations would still have reported a FFr 700 million ($100 million) loss.
The Group is still generally strong, and as France’s third largest insurer has good market share and exposure, but S & P warned that, “If long-term profitability prospects do not improve, the rating may be lowered.
Royal & Sun Alliance (RSA) -The U.K.’s 2nd largest non-life insurer saw its long-term counterparty credit and insurer financial strength ratings of Double A minus affirmed for the group overall; several affiliates have single A ratings, which likewise remained unchanged. S& P maintained its negative outlook on RSA, however.
The report noted that RSA’s recent earnings “have been below historical levels, affected by soft markets globally, and in particular by large losses in commercial lines business.”
Continued maintenance of the rating would depend on increasing earnings, which S&P noted RSA had begun to do, improving its combined ratio “to 108.0% from 109.5% in the first quarter of 1999.”
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