S&P Revises Outlook of AXA U.K. Subs; Affirms ‘A+’ Ratings

February 11, 2004

Standard & Poor’s Ratings Services announced that it has revised its outlook on U.K.-based insurers AXA Insurance U.K. PLC, AXA General Insurance Ltd., and AXA Direct Insurance Ltd. (collectively AXAI) to negative from stable. S&P also affirmed its ‘A+’ long-term counterparty credit and insurer financial strength ratings on the companies.

“The outlook revisions reflect Standard & Poor’s opinion that, given a likely deterioration of conditions in the U.K. insurance market going forward, AXAI might not be able to recover its operating performance and maintain it at a level consistent with the current rating,” stated S&P credit analyst Ashley Gill.

The bulletin added that the “ratings reflect the companies’ strategic importance to the AXA group (core subsidiaries are rated ‘AA-‘) and AXAI’s good stand-alone business position, but are partially offset by weakened–although good–capitalization and weak operating performance.”

S&P said the revised outlook reflects its view that AXAI “may not be able to leverage its existing business position to recover and sustain a level of operating performance commensurate with the current rating with a potential market downturn in 2005 looming.” The rating agency expects the reported combined ratio for AXAI to be worse than competitors in 2003, and about 102 percent in 2004 and 2005. Failure to achieve these levels could result in a downgrade.

“AXAI is expected to remain strategically important to the AXA group according to Standard & Poor’s group rating methodology, as earnings and capitalization levels are not expected to return to levels consistent with that required to be a core operating company under Standard & Poor’s group rating methodology,” added Gill.

S&P also noted that “Capitalization for the U.K. property/casualty operations is expected to have strengthened in 2003, returning to a good level.”

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