A.M. Best Affirms Ratings of AXA S.A.'s U.S. Property/Casualty Subsidiaries
OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of "a+" of AXA Insurance Company (AXA Insurance) and AXA Art Insurance Corporation (AXA Art) (both domiciled in New York, NY). The outlook for the FSR is stable, while the outlook for the ICRs is negative.
Concurrently, A.M. Best has affirmed the FSR of B++ (Good) and ICR of "bbb" of Coliseum Reinsurance Company (Coliseum Re) (Wilmington, DE), which is in run off. The outlook for these ratings is stable. All the above companies are U.S. subsidiaries of AXA S.A. (AXA) (France) [OTC: AXAHY.PK].
The ratings for AXA Insurance reflect its stand-alone attributes, specifically its strong risk-adjusted capitalization, supported by an extensive reinsurance program, solid operating fundamentals that have led to strong gross underwriting profitability and improved net operating results in recent years, favorable liquidity and its strategic importance to AXA. The company serves as AXA's primary domestic insurer of reverse flow business, representing the U.S. portion of multinational accounts generated primarily by the clients of AXA Corporate Solutions Assurance and AXA Versicherung AG. AXA Insurance also provides 60% quota share reinsurance coverage for AXA Art to better utilize its capital.
AXA Insurance essentially serves as the issuer of local U.S. policies as part of the international programs, with most business reinsured with affiliates through quota share reinsurance agreements. While the heavy reliance on affiliated reinsurance leads to high ceded underwriting leverage, the company's outstanding reinsurance recoverables are predominantly collateralized. AXA Insurance also benefits from the financial flexibility of AXA. While AXA Insurance's net operating performance has exhibited volatility in the past, A.M. Best expects future performance over the long term to continue improving based on its clearer strategy and the benefit of continued reinsurance protection. Actions taken in recent years to cleanse the company's balance sheet, including the write-offs of old reinsurance recoverables, should continue to lead to better results that are more reflective of AXA Insurance's remaining core book of business, which has been performing favorably.
The ratings of AXA Art recognize its strong risk-adjusted capitalization, historically superior operating results over the long term and its recognized insurance expertise within the fine arts industry. The company's net results over the last few years have not been as favorable due to weather-related losses in 2012 from Superstorm Sandy, in addition to other causes that A.M. Best does not believe are symptomatic of deficiencies within the company's high quality book of business. In addition, the ratings reflect the implicit and explicit support provided by AXA and its subsidiaries through the utilization of internally available insurance capacity in the form of significant reinsurance transactions, which include excess of loss agreements with its intermediate parent, AXA Art Versicherung AG and the aforementioned 60% quota share with AXA Insurance.
These positive rating factors are partially offset by AXA Art's product line/market concentration, its recent negative loss severity trends, the increasingly competitive market conditions in the fine arts industry and AXA Art's elevated expense ratio relative to its commercial property composite peers.
The outlook for the ratings of AXA Insurance and AXA Art reflect A.M. Best's concerns with AXA's exposure to the ongoing uncertainty in the eurozone and the potential impact on its ability to support its U.S. operations.
Coliseum Re remains in run off. The company continues to maintain adequate capitalization and liquidity relative to its run-off activities. Considering these factors, the outlook for the ratings is stable.
Upward rating movement for the U.S. property/casualty companies within the AXA organization is unlikely for the foreseeable future. Negative rating actions could occur if the balance sheet of AXA is impaired by its exposure to investments in eurozone economies, leading to a material weakening of its risk-adjusted capitalization. Furthermore, any perceived lessening of the support provided by AXA for its U.S. property/casualty subsidiaries also could spark negative rating actions.
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visitwww.ambest.com.
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A.M. Best Co.
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