Best Affirms AXA Canada P/C Subsidiaries Ratings; Revises Outlook to ‘Stable’

June 14, 2006

A.M. Best Co. has affirmed the financial strength ratings (FSR) of several of AXA Canada Inc.’s property/casualty insurance subsidiaries, as follows: the FSR of “A” (Excellent) of AXA Assurances Inc. (Montreal, Quebec) and its wholly owned subsidiary, AXA Assurances Agricoles inc. (Montreal, Quebec); the FSR of “A-” (Excellent) of AXA Insurance (Canada) (Ontario), AXA Pacific Insurance Company (British Columbia) and Anglo Canada General Insurance Company (Ontario), and the FSR of “B++” (Very Good) of the Insurance Corporation of Newfoundland, Limited (ICON). The outlook for these ratings has been revised to stable from negative.

In addition Best assigned an FSR of “A-” (Excellent) to InnovAssur, Assurances Generales inc. (Montreal, Quebec) with a stable outlook.

Best also said it has changed its FSR rating on Citadel General Assurance Company (Ontario) to “NR-3 (Rating Procedure Inapplicable) from ‘B++’ (Very Good) and removed from under review with developing implications.”

“The affirmation of AXA Assurances Inc.’s rating is reflective of its excellent capitalization, which is enhanced and protected by an historically profitable operating performance; diversification by product line; conservative investment portfolio; stable reserve development; a comprehensive reinsurance program; strong experienced management team; and market leadership position in the Canadian property and casualty industry,” said Best. “In addition, the rating takes into consideration A.M. Best’s favorable view of AXA Canada’s plans to integrate Citadel General Assurance Company into AXA Assurances Inc. and several of its subsidiaries at the end of the second quarter of 2006.”

Best noted, however, that “these positive rating factors are offset in part by the geographic concentration of the company’s own book; above average expense ratio; below average investment returns; more competitive pricing pressures; potential dividend payments, which could hamper surplus growth; and the challenges the company faces in completing the integration process. These risks are partially mitigated by AXA Canada’s strong experienced management team and the geographic diversification of the company’s property/casualty insurance subsidiaries. The rating affirmation of AXA Assurances Agricoles inc. is based upon its group rating status with its parent.

“The affirmation of the ratings of AXA Insurance (Canada), AXA Pacific Insurance Company and Anglo Canada General Insurance Company are based upon their excellent levels of capitalization; favorable underwriting leverage; improvement in underwriting and operating performance over the last three years; strong broker relations; corporate reinsurance protection; the explicit financial support of AXA Assurances Inc.; and the synergies they derive from being part of the AXA Canada Group.

“These strengths are partially offset by their historical operating performance, which has been below average; the current downturn in the underwriting cycle placing pressure on pricing; rate restrictions imposed by regulators on the automobile insurance product in most provinces in Canada; and potential dividend payments.”

“The affirmation of ICON’s rating is based upon its historically strong profitability; leading market position as one of the top five property/casualty insurance companies in Newfoundland; the benefits from participating in the corporate reinsurance program, which includes external and internal reinsurance treaties providing surplus protection and capacity; and the explicit financial support of its parent,” Best continued.

However, it also indicated that these “positive factors are partially offset by ICON’s weak risk-adjusted capitalization relative to its rating, below average investment returns, concentration of risk in personal lines in Newfoundland and the uncertainty surrounding the long-term benefits of regulatory changes to the automobile insurance product in that province.”

Concerning the rating assignment for InnovAssur, Assurances Generales inc., Best said it “reflects its excellent capitalization, strong liquid balance sheet, improving operating performance, conservative reserve philosophy, favorable business environment, its strategic role within the AXA Canada group and the explicit financial support of its parent. These strengths are partially offset by the company’s geographic and product line concentration and historically below average profitability.”

Best reiterated that the rating action on Citadel General “is based upon the integration of this company into AXA Assurances Inc. and several of its subsidiaries at the end of the second quarter of 2006. This action will effectively result in creating a shell company with no insurance risk or liabilities on its balance sheet. At that time, the company will cease active operations.”

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