Ratings Roundup: AXA Canada, Orkney Re II, Ajax Re

May 13, 2009

A.M. Best Co. has affirmed the financial strength ratings (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a” of AXA Assurances Inc. Of Montreal, Quebec and its wholly owned subsidiaries, AXA Insurance (Canada), AXA Pacific Insurance Company, AXA General Insurance Company and AXA Assurances Agricoles. Best also affirmed the FSR of ‘A-‘ (Excellent) and ICR of “a-” of InnovAssur, Assurances Generales , as well as the ICR of “bbb” of the parent holding company, AXA Canada Inc. The outlook for all ratings is stable. Best said “The ratings of AXA Assurances Inc. are primarily a reflection of its profitable operating performance, geographic and product line diversification, stable reserve development, knowledgeable management team and market leadership position in the Canadian property/casualty industry. In addition, the ratings are enhanced by the company’s strategic importance and the financial benefits it receives from the overall group of companies of AXA S.A. (France).” Best noted, however that these “strengths are partially offset by a weakening in risk-adjusted capitalization, in conjunction with diminished earnings, soft market conditions in commercial lines, strong competitive pricing, volatile auto markets, inflationary pressure on claims costs and weakened financial markets. Contributing to the decline in capitalization were significant investment losses, an increase in frequency and severity of loss from storms and dividends to shareholders.”

Standard & Poor’s Ratings Services has revised its senior debt rating on Orkney Re II PLC’s Series A-2 notes to ‘D’ from ‘CC’. The ‘C’ subordinated debt rating on the company’s Series B notes is unchanged. S&P noted: “A scheduled interest payment on the Class A-2 notes was due today and was not made. In addition, the company has told Standard & Poor’s it will not make the payment within the three-business-day cure period. The reason for the default is the continued decline in the mark-to-market value of assets in the excess reserve account. Under the terms of the reinsurance agreement, the cash flow on the assets in the excess reserve account that Orkney Re II plc would otherwise use to make the payments due on the notes is being used to satisfy the XXX reserve requirement of the cedent, Scottish Re (U.S.).” Credit analyst Gary Martucci added: “We will continue to monitor the development of the transaction and take ratings actions as appropriate.”

A.M. Best Co. has downgraded the debt rating to “d” from “c” of the $100 million Series 1, Class A principal at risk variable rate notes (the notes) issued by Ajax Re Limited (Cayman Islands). Best also withdrew the debt rating on the notes. The previous rating had a negative outlook. “This rating action reflects the inability of Ajax Re to make the full payment on the outstanding principal amount of the notes on the May 8, 2009 redemption date,” Best explained.

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