S&P Raises AXA Insurance (Ireland) to ‘BBB+’

April 1, 2004

Standard & Poor’s Ratings Services announced that it has raised its counterparty credit and insurer financial strength ratings on AXA’s Irish subsidiary, AXA Insurance Ltd. (AXA Ireland) to ‘BBB+’ from ‘BBB’ with a stable outlook.

“The upgrade reflects AXA Ireland’s outperformance of Standard & Poor’s earnings and capitalization expectations, coupled with markedly less uncertainty surrounding the claims environment in Ireland (specifically relating to bodily injury claims),” stated S&P credit analyst Fahad Changazi. The company’s improving competitive position is supportive of the ratings, although its activities remain concentrated in the motor market.

S&P said, “AXA Ireland has a good competitive position in the Irish non-life market. It is the third-largest non-life insurer, primarily focused in the motor segment, where it is the second largest with a 24% market share. AXA Ireland benefits from a multi-line distribution strategy, and its low cost base relative to peers gives a distinct competitive advantage. The transfer of a Northern Irish portfolio from selected entities within AXA ‘s U.K. non-life insurance operation, development of a profitable household account, and revenue from ‘nonrisk’ products help to offset (although not mitigate) concentration risk to the Irish motor market. The company has a strong brand and good levels of customer retention. “

It also noted that “AXA Ireland’s operating performance exceeded expectations in 2003: all business lines returned profits with an overall combined ratio of 86 percent, and an ROE of 50 percent. The market as a whole has been benefiting from an improving claims environment, and AXA Ireland’s performance in this context is considered exceptional and not sustainable in the long term, as premium rate reductions begin to impact published results. Nevertheless, AXA Ireland produced better results than most peers in 2003, as the company enjoys a lower expense base.”

Changazi noted that “The stable outlook reflects Standard & Poor’s expectation that AXA Ireland will continue to record profits post 2004, producing better-than-average underwriting results compared with the market; an average combined ratio of 100 percent is expected through the premium cycle.”

AXA Ireland is expected to continue to reduce its reliance on the motor market by developing its household account profitably, and increasing revenues from “nonrisk” products. The Northern Irish portfolio will be rapidly aligned with AXA Ireland’s current mix.

Capital adequacy is expected to remain strong, supported by an appropriate level of retained earnings.

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