Best Affirms AXA Canada Ratings

May 13, 2004

A.M. Best Co. announced that it has affirmed the financial strength ratings of AXA’s main Canadian P/C subsidiaries.

AXA Canada, a holding company, “whose property/casualty insurance operations throughout Canada rank seventh overall in terms of direct premiums written,” is the French insurer’s principal Canadian operation, said Best. The ratings vary, however, according to different geographic areas and types of risks. (See below for details)

“The affirmation of the ratings considers each company’s respective capital position, historical underwriting and operating results, experienced management teams, disciplined underwriting standards, market leadership and market conditions, as well as AXA Canada’s prudent utilization of reinsurance to spread risk, protect surplus and add capacity,” said Best.

“Partially offsetting these strengths are the significant risk exposures on automobile lines for the subsidiaries operating in Alberta and Ontario, current interest rate environment and exposure to catastrophic loss or regulatory changes due to a concentration of exposure within specific geographic areas,” the bulletin continued.

Best described AXA Canada’s primary subsidiaries in Quebec as having “excellent capitalization and continue to produce strong profits from operations due to sound underwriting and very profitable market conditions that exist in that province.”

However, Best noted that “the ratings of AXA Canada’s subsidiaries operating in other provinces, specifically, Alberta, Ontario and Newfoundland, are under pressure, primarily due to the volatile automobile markets and the uncertainty of regulatory changes being enacted to make the automobile product more affordable and profitable.

“Additionally, these companies are being challenged to produce profitable underwriting results since investment returns have been below average due to the low interest rate environment. Furthermore, there is significant risk of catastrophic loss from earthquakes as well as exposure to construction liability claims in western Canada. Management has taken aggressive steps to reduce these exposures and to protect surplus through the efficient use of reinsurance backed to quality reinsurers. Moreover, loss reserves were significantly strengthened to reduce the potential for adverse development.

“The ratings for the subsidiaries located in Ontario and Newfoundland will remain under pressure pending capital strengthening, stabilization of loss reserves and further underwriting improvement.”

The announcement listed the following companies and rating details:
— The financial strength ratings of ‘A+’ (Superior) have been affirmed with a stable outlook for the following subsidiaries of AXA Canada Inc. Both subsidiaries are located in Quebec.
— AXA Assurances Inc.
— AXA Assurances Agricoles Inc.
— The financial strength rating of ‘A’ (Excellent) has been affirmed with a stable outlook for AXA Pacific Insurance Company (British Columbia).
— The financial strength ratings of ‘A-‘ (Excellent) have been affirmed with a negative outlook for the following subsidiaries of AXA Canada Inc. All of these subsidiaries are located in Ontario, except for the company located in Newfoundland.
— AXA Insurance (Canada)
— Anglo Canada General Insurance Company
— Insurance Corporation of Newfoundland Limited

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