S&P Puts AXA Insurance on CreditWatch After Ireland Ratings Downgrade

Standard & Poor’s Ratings Services said today that it placed its ‘BBB+’ long-term counterparty credit and insurer financial strength ratings on AXA Insurance Ltd. on CreditWatch with negative implications.

S&P explained that it took the action following its decision on Feb. 2 to lower its ratings on the Republic of Ireland to A-/Watch Neg/A-2 from A/Watch Neg/A-1. “Under our ratings criteria, we only rate insurance companies higher than the sovereign under specific circumstances.”

S&P added that although it factors in the “support for AXA based on its membership of the AXA group, the limit which the sovereign effectively places on the rating supersedes the implied group support.

“We understand that AXA has no exposure to Irish government bonds. Hence, we believe the quality of the company’s investment portfolio is not directly affected by movements in the sovereign rating.

“The CreditWatch placement follows that on Ireland and reflects the possibility of a further downgrade. If we lower the sovereign credit ratings by two notches or more, to below AXA’s current ‘BBB+’ level, we would also lower the ratings on AXA so that they were in alignment with the sovereign.

“In the wake of the Feb. 2, 2011, rating action, we consider such a development to be a realistic possibility. Consequently, we consider it appropriate to place the AXA rating on CreditWatch with negative implications. That said, we would currently expect the ratings on both Ireland and AXA to remain in the investment-grade category over the rating horizon.”

S&P added that it “expects to resolve the CreditWatch placement on Ireland, and subsequently that on AXA, by early in the second quarter of 2011.”

Source: Standard & Poor’s

Topics AXA XL