Best Lowers AXA RE Ratings

July 5, 2007

A.M. Best Co. has downgraded the financial strength rating (FSR) to “A-” (Excellent) from “A” (Excellent) and the issuer credit rating (ICR) to “a-” from “a” of French reinsurer AXA RE, and revised its outlook for the ratings to negative from stable.

“The ratings of AXA RE reflect the fronting agreement with PARIS RE S.A. and the capital commitment of AXA S.A. (AXA RE’s ultimate parent) to AXA RE while the fronting agreement with PARIS RE is still in place,” said Best. (See IJ web site April 6,10, 2006, Jan. 16 and June 22).

Best described the sale of AXA RE to PARIS RE in December 2006, noting the retroactive cession provision to January 1, 2006 . AXA RE transferred the vast majority of its reserves (except asset-based reinsurance and part of the life portfolio in run off) to PARIS RE through a 100 percent quota share agreement.

“AXA RE is acting as a fronting company to PARIS RE from 1 January 2006 until the end of September 2007, while the reserves prior to 1 January 2006 ceded to PARIS RE are guaranteed back by AXA and AXA RE,” Best explained.

CGRM (Compagnie Generale de Reassurance de Monte Carlo) was bought by PARIS RE early in January 2007, and the AXA RE Asia Pacific ownership transfer is to be finalized in July of this year.

Best said it “believes that AXA RE’s current risk-adjusted capitalization is strong and supports the ratings. AXA RE will be in complete run off during the fourth quarter of 2007, once the fronting agreement with PARIS RE is to be fully terminated.”

Best also noted that it would continue to “monitor the level of capital at AXA RE and the commitment from AXA following the termination of the fronting agreement.”

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