A.M. Best Co. announced several ratings actions affecting the AXA Group’s Canadian subsidiary companies, affirming some ratings, and lowering others.
It has affirmed the financial strength ratings of A+ (Superior) of AXA Canada Inc., AXA Assurances Inc. and AXA Assurances Agricoles Inc., both headquartered in Montreal, Quebec, and the A (Excellent) rating of AXA Pacific Insurance Company of Vancouver, B.C. All were assigned a “stable” outlook.
Concurrently Best announced that it has downgraded the financial strength ratings to A- (Excellent) from A (Excellent) of AXA Insurance (Canada) and Anglo Canada General Insurance Company, both of London, Ontario, and Insurance Corporation of Newfoundland Limited (ICON) of St. John’s, Newfoundland, and has assigned them a “negative” outlook.
“The affirmation of the ratings for AXA Assurances Inc., AXA Assurances Agricoles Inc. and AXA Pacific Insurance Company considers their respective capital positions, historically excellent underwriting and operating results, experienced management teams, disciplined underwriting standards and prudent utilization of reinsurance. These companies are also among the market leaders in their respective provinces,” said Best.
It noted that partially “offsetting these strengths is pressure on the capitalization of AXA Assurances due to the performance of its subsidiaries, particularly Anglo Canada. In addition, the companies maintain expense structures above the national average; however, management has been successful in reducing the expense ratio.”
Best explained that the “downgrade of the ratings for AXA Insurance (Canada) and Anglo Canada is a result of their weakened capital position and the adverse underwriting conditions that continue to persist for automobile insurance in Ontario.” It also noted that “capitalization has deteriorated due to weakened investment returns and poor underwriting performance driven by adverse loss development on their Ontario auto book of business.”
ICON’s downgrade is “primarily driven by the rating action of AXA Insurance (Canada), since the latter provides significant reinsurance protection to ICON via a quota share arrangement,” said Best. “The ratings will remain under pressure pending enhanced capitalization driven by improvement in their overall operating results or from additional capital infusions by the parent.”
The rating agency indicated, however, that “offsetting these negative factors is the fact that the Ontario operations continue to maintain sound capitalization despite recent declines, as well as a conservative and disciplined underwriting strategy and focus. Additionally, the parent company, AXA Canada, Inc, has shown explicit financial support.”
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