S&P Affirms AXA UK’s ‘AA-‘ Ratings; Removed from CreditWatch

September 27, 2010

Standard & Poor’s Ratings Services has removed its long-term counterparty credit and insurer financial strength ratings on U.K.-based non-life insurer AXA Insurance U.K. PLC (AXAI) from CreditWatch with negative implications and affirmed them at ‘AA-‘. The outlook is stable.

S&P noted that the ratings had been placed on CreditWatch on June 16, 2010, following the announcement of the sale of some of AXA’s U.K. life insurance business.

S&P also explained that in order to resolve AXAI’s CreditWatch negative placement, it has “reviewed AXAI’s stand-alone credit profile and its status within the AXA group. The rating benefits from three notches of support under our criteria for groups, but the fact that we view AXAI’s stand-alone credit profile as strong was an important factor in our decision to affirm AXAI’s core status.”

The rating agency added that the stand-alone credit profile is “sustained by a competitive position we view as strong. We consider AXAI’s capital adequacy to be in line with the credit profile. We view operating performance as a weakness to the stand-alone profile and to the core status, as it is weaker than other non-life AXA subsidiaries we consider as core and contrasts with the group’s overall performance in that segment.

“The core status is supported by our expectation that AXA Group will commit to fully supporting its U.K. non-life operations. We believe that the reduced size of AXA’s presence in the U.K. life insurance market does not materially affect the credit profile of AXAI and that it has no long-term implications on AXA’s presence in the U.K. non-life market. As a core entity of AXA Group, the outlook on AXAI mirrors that on the group.”

However, credit analyst Nigel Bond cautioned: “Our view of both the credit profile and AXAI’s core status is highly dependent on improvements in AXAI’s underwriting and operating performance. In particular, we expect that the net combined ratio will remain below 100 percent throughout the insurance cycle. If the expected improvement does not occur, then we may revise the credit profile and group status. If this occurs, the ratings and outlook on AXAI could be changed independently from those on AXA groups’ other core entities.”

Source: Standard & Poor’s

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