A.M. Best announced that it has downgraded the financial strength ratings to A (Excellent) from A+ (Superior) of the members of the France’s AXA Group Corporate Solutions units (AXACS).
Best’s bulletin cited “the substantial deterioration in AXACS’s consolidated operating performance and balance sheet strength in 2001 and the challenges associated with the restructuring exercise, which is currently being undertaken,” as the principal reasons for lowering the ratings.
It also said that the actions apply to”the ratings of AXA Corporate Solutions Insurance Company and AXA Corporate Solutions Excess and Surplus Lines Insurance Company, United States,” which were lowered from A (Excellent) to A- (Excellent). “The A (Excellent) financial strength rating of AXA Corporate Solutions Assurance, France, has been affirmed. All ratings have been placed under review with negative implications,” Best’s announcement added.
Best further explained that, “AXACS’s consolidated capital as measured on a risk-adjusted basis had fallen as a consequence of loss severity and deterioration in asset values.” It recognized, however that AXA’s management was addressing the problem, and that the parent company was taking steps to reduce risk exposure and is expected to inject needed capital into its Corporate Solutions units.
AXACS reported a consolidated net loss of €227 million ($215 million) in 2001, due mainly to losses associated with the WTC attacks, the gross estimate is around €760 million ($718 million), and declining investment returns.
Best’s report observed that “Management is envisaging restructuring the group through a strategic separation into three distinct operating units by September 2002: reinsurance, direct and run-off management. This is a deviation from the original strategy but viewed as necessary to respond to market dynamics and to maximise profitability.”
“A.M. Best is closely monitoring developments within AXACS. The ratings are likely to remain under review until A.M. Best has additional information to enable it to discuss and further assess the group’s financial results and capital position in addition to reviewing progress with regard to the restructuring plan,” the announcement concluded.
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