S&P Affirms AXA Group

Standard & Poor’s affirmed its “AA” longterm counterparty credit rating and insurer FSR on the operating entities of Paris-based global insurance group AXA, as well as its “A+” longterm counterparty credit ratings on AXA and AXA Financial Inc., the French and U.S. holding companies of the group. However, the outlook for long-term ratings on the group was revised to negative from stable.

The key rating factors are the AXA group’s extremely strong global business position in the world’s leading insurance markets, very strong—although increasingly pressurized— capitalization, and very strong management team and strategic track record.

The group’s risk-based consolidated capitalization remains very strong, but has become more pressurized and dependent on retained earnings over the past few months. The group has had to cope with substantial reductions in the market value of its equity book due to a sharp deterioration of the capital markets and the consequences of the World Trade Center attack. S&P believes that the AXA group would remain highly committed to maintaining capital adequacy at a very strong level—according to S&P’s capital adequacy model—should any significant acquisition opportunity arise in the near future.

Although operating performance in life insurance proved good from 1997 to 2000, property-casualty and international insurance earnings continually deteriorated over the same period, reaching negative return on revenue levels both in 1999 and 2000, mainly driven by loss ratios in excess of 80 percent and a persistently high expense base (30 percent on average).

As the result of an adverse capital market environment and a disappointing loss experience in 2001 (the group’s combined ratio was 112 percent), operating cash earnings are likely to have grown very moderately in 2001.