Ratings Roundup: MAPFRE USA, AXA US,

December 19, 2011

A.M. Best Co. has downgraded the financial strength rating to ‘A’ (Excellent) from ‘A+’ (Superior) and issuer credit ratings to “a+” from “aa-” of MAPFRE USA Group following the rating downgrades for its parent company, Spain’s MAPFRE S.A.

The lead company in MAPFRE USA is The Commerce Insurance Company, based in Mass., and includes its inter-company pool members, Citation Insurance Company, Commerce West Insurance Company, American Commerce Insurance Company, State-Wide Insurance Company and MAPFRE Insurance Company of Florida. Best has also downgraded the ICR to “bbb+” from “a-” and debt rating to “bbb+” from “a-” of $300 million 5.95 percent senior unsecured notes due 2013 of the parent holding company, MAPFRE U.S.A. Corp. All of the ratings have been placed under review with negative implications. These rating actions “were driven by MAPFRE S.A.’s exposure to the continuing negative developments regarding the euro zone sovereign debt crisis and the action A.M. Best Europe – Rating Services Limited has taken with regard to a number of European (re)insurers,” Best explained. In addition, MAPFRE S.A. “continues to have exposure to investments in several peripheral euro zone economies, in particular Spain and Portugal, and is compounded by MAPFRE S.A.’s exposure to commercial property in Spain through its investment holdings.” Best said the ratings would remain under review with negative implications while it examines MAPFRE S.A.’s exposure to a prolonged adverse economic environment within the euro zone.” Best is particularly concerned with the exposure to sovereign debt and the potential for contagion to other asset classes, particularly holdings of European bank securities. Best also said it “will assess the likely impact of a prolonged financial crisis and recessionary environment on MAPFRE S.A.’s market position and ongoing business operations. Negative rating actions could occur if there were a worsening of risk-adjusted capitalization tied to investment losses or a deterioration of the operating environment in key territories.” In conclusion Best noted that the FSR of ‘A-‘ (Excellent) and ICR of “a-” are unchanged and remain under review with positive implications for MAPFRE Insurance Company (Florham Park, NJ).”

A.M. Best Co. has placed under review with negative implications the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a” of AXA Insurance Company, as well as the FSR of ‘A’ (Excellent) and ICR of “a+” of AXA Art Insurance Corporation. Best has also placed under with review with negative implications the FSR of ‘B++’ (Good) and ICRs of “bbb” of Coliseum Reinsurance Company and AXA Corporate Solutions Life Reinsurance (ACSLRe) (both domiciled in Wilmington, Del.). All of the companies are subsidiaries of France’s AXA. “These rating actions are in response to the continued negative developments among the euro zone economies and its potential effects on AXA, the ultimate parent, which affords these U.S. subsidiaries the benefit of certain levels of rating enhancement.,” Best explained. As with a number of other rating actions Best has taken recently, they are related to its concerns with the parent company, stemming from the “continued negative developments regarding the euro zone sovereign debt crisis, continued deterioration of the sovereign creditworthiness among several euro zone countries and the negative economic outlook for the region. Since the ratings of AXA Insurance Company, Coliseum Re, ACSLRe and AXA Art all receive partial rating enhancement from being part of AXA, any material financial exposure to AXA may negatively impact the ratings of its subsidiaries. The ratings for each of the noted AXA U.S. subsidiaries will remain under review with negative implications while Best examines AXA’s exposure to a prolonged adverse economic environment within the euro zone and the potential impact on its U.S. insurance operations. Upward rating pressures are unlikely at this point. Downward rating pressure may occur if there is a worsening of AXA’s risk-adjusted capitalization, which is tied to investment losses, deterioration of the operating environment in key territories of the parent or a perceived lessening of support provided by AXA for its U.S. insurance operations.”

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