Best Affirms AXA Financial and Subsidiaries ‘A+’ Ratings

August 15, 2005

A.M. Best Co. announced that it has affirmed the financial strength rating of “A+” (Superior) of the life insurance subsidiaries of AXA Financial, Inc. AXA Financial is a member of France’s AXA Group (France) and the parent of AXA Equitable Life Insurance Company and MONY Life Insurance Company.

In addition Best affirmed the issuer credit rating (ICR) of “aa-” of AXA Equitable and assigned ICRs of “aa-” to the other core life insurance subsidiaries of AXA Financial. Best also affirmed the ICR of “a-” of AXA Financial, as well as the ratings on the group’s existing debt securities. The outlook on all ratings is stable.

“The ratings reflect the consistent earnings generated by AXA Financial’s large blocks of ordinary life and variable annuity business, both of which have benefited from favorable operating metrics and diligent expense management,” said Best.

“The ratings also reflect the earnings and strategic benefits accruing to AXA Financial from its majority ownership stake in Alliance Capital (Alliance), a prominent publicly-traded global asset management firm, which remains a steady source of income for the company,” the report continued. “AXA Financial’s broad distribution footprint, which includes AXA Advisors’ captive producers, as well as the wholesaling capabilities of AXA Distributors, provides a means by which it can continue to grow its formidable share of the affluent and emerging affluent segments of the retail protection and savings markets. Both its proprietary and non-proprietary distribution capabilities were strengthened by the 2004 acquisition of The MONY Group (MONY).

“While AXA Financial benefits from Alliance’s earnings and strategic fit, Alliance also presents investment risk. Volatile equity markets affect not only the stability of earnings that can be distributed by Alliance to its shareholders, but also the value of Alliance’s publicly-traded shares and, therefore, the strength of AXA Equitable’s balance sheet. Significant unrealized losses on its stake in Alliance during the most recent equity market downturn, as well as credit-related investment losses and large annual dividend payments to its parent, have contributed to a decline in AXA Financial’s risk-based capitalization compared to a few years ago. A.M. Best views the group’s risk-adjusted capitalization as modest for its current rating, particularly since capital remains susceptible to fluctuations in Alliance’s share price.

“Furthermore, competitive pressures, low interest rates and expenses related to the MONY acquisition have affected the company’s recent earnings. Nevertheless, A.M. Best expects AXA Financial’s operating fundamentals to improve in the near- to medium-term due to its experienced and focused management team, its well-known brand and reputation and its refined financial advisory strategy. Overall, A.M. Best believes that the earnings capacity of the core insurance operations–enhanced by the acquisition of MONY through expense synergies and distribution relationships–will provide a growing, solid capital base supporting AXA Financial’s operating profile.

“The group’s financial leverage is slightly under 29 percent, which is acceptable for its current ratings. Absent an acquisition, A.M. Best does not expect this ratio to increase, and it could decline if current maturities of long-term debt are refinanced through the parent company. Additionally, the earnings capabilities of AXA Financial’s operating companies provide solid interest coverage in the range of five to seven times.”

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