A.M. Best Co. has removed from under review with negative implications and upgraded the issuer credit rating (ICR) to “a+” from “a” and affirmed the financial strength rating (FSR) of A (Excellent) of AXA Insurance Company (New York, NY). The outlook assigned to the ICR is negative, while the outlook for the FSR is stable.
Additionally, A.M. Best has removed from under review with negative implications and affirmed the FSR of A (Excellent) and ICR of “a+” of AXA Art Insurance Corporation (AXA Art) (New York, NY). The outlook assigned to the ICR is negative, while the outlook for the FSR is stable.
Concurrently, A.M. Best has removed from under review with negative implications and affirmed the FSR of B++ (Good) and ICRs of “bbb” of Coliseum Reinsurance Company (Coliseum Re) and AXA Corporate Solutions Life Reinsurance (ACSLRe), which are in run off. The outlook assigned to these ratings is stable. All the above companies are U.S. subsidiaries of AXA S.A. (AXA) (France) [OTC: AXAHY.PK]. All companies are domiciled in Wilmington, DE, unless otherwise specified.
The upgrading of the ICR of AXA Insurance Company reflects its stand-alone attributes, specifically strong risk-adjusted capitalization, supported by an extensive reinsurance program, solid operating fundamentals that have led to improved net underwriting and operating results in recent years, favorable liquidity and the company’s 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 Company also provides 60% quota share reinsurance coverage for AXA Art to better utilize its capital.
Acting essentially as the issuer of local U.S. policies in the context of international programs, most business is reinsured to AXA Insurance Company’s affiliates through quota share reinsurance agreements. While heavy reliance on affiliated reinsurance leads to high ceded underwriting leverage, the company’s outstanding reinsurance recoverables are predominantly collateralized. AXA Insurance Company also benefits from the financial flexibility of AXA. While the company’s net operating performance has exhibited volatility in the past, A.M. Best expects recent, improved performance to continue over the long term based on AXA Insurance Company’s clearer strategy, along with 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 Company’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 and its recognized insurance expertise within the fine arts industry. 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. The reinsurance transactions include excess of loss agreements with its intermediate parent, AXA Art Versicherung AG, and the aforementioned 60% quota share with AXA Insurance Company.
These positive rating factors are partially offset by AXA Art’s product line/market concentration, slightly negative loss frequency trends, the increasingly competitive market conditions in the fine arts industry and AXA Art’s expense ratio disadvantage relative to industry peers.
While A.M. Best has removed the ratings of AXA Insurance Company and AXA Art from under review, a negative outlook has been assigned to the ICRs reflecting 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, A.M. Best assigned a stable outlook.
The ratings of ACSLRe are based upon its limited role within the AXA group as a U.S. life reinsurer and administrator of closed blocks of life, health and investment risks and the capital support provided by AXA. ACSLRe primarily reinsures a closed block of variable annuities.
Upward rating movement for 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. Also, any perceived lessening of the support provided by AXA for its U.S. insurance 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.
Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.