Rating Agencies React to AXA’s Acquisition of ING Seguros

February 19, 2008

A.M. Best Co. and Standard & Poor’s Ratings Services have taken slightly different views of France’s AXA Group’s agreement to purchase 100 percent of the share capital of the ING Group’s Mexican insurance subsidiary ING Seguros, for $1.5 billion (app. €1 billion) (See IJ web site – https://www.insurancejournal.com/news/international/2008/02/13/87289.htm) .

Best has placed the financial strength rating (FSR) of ‘A’ (Excellent) and the issuer credit ratings (ICR) of “a” of Seguros ING, S.A. de C.V. (Seguros ING) and ING Fianzas, S.A. de C.V. under review with negative implications. They “will remain under review pending further discussions with new management regarding strategic plans for Seguros ING and the company’ s future role within AXA Group, as well as the closing of the transaction,” said Best.

S&P, however affirmed its ‘BBB+’ long-term counterparty credit and financial strength ratings on Seguros ING S.A. de C.V. (Seguros ING) following the announcement. S&P also, affirmed its ‘mxAAA’ national scale (CaVal) financial strength and counterparty credit ratings on Seguros ING. The outlook on these ratings is stable.

“Although the transaction is pending regulatory approval, the affirmation is based on our opinion that AXA’s investment in the Mexican insurance market of $1.5 billion shows its commitment to the Mexican market,” explained S&P credit analyst Alfonso J. Novelo.

S&P said it expects “the subsidiary to maintain a strategically important status for AXA group. In this sense, we expect the insurance company in Mexico to improve its underwriting capabilities, especially in the property and casualty business, finally benefiting the company’s bottom-line statutory results.”

S&P also noted that Seguros ING would receive support from AXA in terms of “risk management practices, capital, and business strategy.” Seguros ING has the largest share of the Mexican P/C market and the seventh-largest share of the Mexican life market, “both lines of products that fit under AXA’s group strategy. During the past two years the company maintained strong levels of capitalization according to our capital model and had invested in improving its distribution channels.”

The reasons for assigning a “stable outlook” for the ratings “incorporates our expectation that the insurance company will maintain strong capital levels and improve its overall financial performance; reduce its combined ratio; turn around its property and casualty business lines’ underwriting results; and improve cost efficiencies,” said S&P.

The bulletin added, “future rating actions will depend on AXA’s success in integrating the business and turning around property and casualty results, and the insurance company’s financial performance in Mexico.”

Sources: A.M. Best – www.ambest.com; Standard & Poor’s – www.standardandpoors.com

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