MOODY'S CONFIRMS CREDIT RATINGS OF AXA S.A. (SUBORDINATED DEBT AT A2) AND AXA FINANCIAL (SENIOR DEBT AT A2) FOLLOWING ANNOUNCEMENTS OF DLJ SALE AND AXA FINANCIAL MINORITY BUY-OUT
Approximately $6 Billion of Debt Securities Affected.
Paris and New York, August 31, 2000 -- Moody's Investors Service has confirmed the A2 subordinated debt rating
of AXA S.A. (AXA) and the A2 senior debt rating of AXA Financial
Inc. (AXA Financial). The insurance financial strength ratings
of Equitable Life Assurance Society of the U. S. and AXA's
other main operating affiliates were also confirmed at Aa3. The
outlook on the ratings of AXA and all of its affiliates remains stable.
In a related action Moody's placed the A3/Prime-2 ratings of DLJ
on review for possible upgrade.
This rating action follows the announcement that (i) AXA Financial has
agreed to sell its stake in majority owned Donaldson, Lufkin &
Jenrette, Inc. (DLJ), its investment banking subsidiary,
to Credit Suisse First Boston for USD 8.1 billion, of which
USD 5.7 billion will be in Credit Suisse Group shares,
and (ii) AXA was launching an offer to buy out the minority interests
in AXA Financial, in which it holds today a 60.3%
stake. Under this proposal, the minority shareholders of
AXA Financial would receive approximately USD 10.4 billion,
of which USD 4.1 billion will be in new AXA shares.
In confirming the group's ratings, Moody's pointed to the strategic
benefits ensuing from the restructuring of AXA's holdings in the U.S.,
underpinning a reallocation of the group's capital to its core businesses
- insurance and asset management - and a reduction of its
exposure to riskier and more volatile investment banking activities.
Furthermore, eliminating minority interests in AXA Financial could
also (i) increase the contribution to AXA's earnings from its U.S.
life insurance and asset management operations, (ii) allow a deeper
integration into the group - with the potential for increased synergies,
and (iii) present the group with some long term strategic benefits in
the U.S. market.
Mitigating these benefits, Moody's also noted that the two transactions
taken together will result in a substantial net cash disbursement for
the group, that will be primarily funded by debt and could be an
added strain on AXA's debt service capacity. Furthermore,
although Credit Suisse stock is a quality and liquid investment,
AXA will have initially USD 5.7 billion of its assets now exposed
to fluctuations in the price of these shares.
More generally, Moody's said that it expects AXA to continue to
opportunistically seek acquisitions in its key markets and core businesses.
These acquisitions, if properly selected, priced, and
integrated, by adding scale and diversification and offering the
group opportunities to create value, should normally contribute
to fortify AXA's global insurance and asset management franchise,
financial strength and credit worthiness, as indicated by AXA's
good track record. Nevertheless, the group's acquisition
strategy and role as major industry consolidator has lead to a substantial
increase of its indebtedness in recent years.
Moody's stable outlook on AXA's ratings is predicated upon its capacity
to (i) maintain a financial structure that is consistent with its risk
profile, (ii) successfully execute the integration of the acquired
businesses, and (iii) generate the expected synergies and windfall
profit on the acquired businesses.
The following ratings have been confirmed:
AXA S.A. - subordinated debts at A2;
AXA Financial, Inc. - senior debt at A2.
Equitable Life Assurance Company - insurance financial strength
at Aa3; surplus notes at A2; commercial paper at Prime-1;
Alliance Capital Management LP - issuer at A2, commercial
paper at Prime-1;
AXA Nordstern Colonia Versicherung AG - insurance financial strength
AXA Colonia Lebensversicherung AG - insurance financial strength
AXA Colonia Versicherung AG - insurance financial strength at Aa3;
AXA Assurances Vie - insurance financial strength at Aa3;
AXA Assurances IARD - insurance financial strength at Aa3;
AXA Collectives - insurance financial strength at Aa3;
AXA Conseil IARD - insurance financial strength at Aa3;
AXA Conseil Vie - insurance financial strength at Aa3;
AXA Courtage IARD - insurance financial strength at Aa3;
AXA General Insurance Ltd - insurance financial strength at Aa3;
AXA Insurance UK Plc - insurance financial strength at Aa3;
Sun Life Assurance Society Plc - insurance financial strength at
Sun Life Pensions Management Ltd - insurance financial strength
Sun Life Unit Assurance Ltd - insurance financial strength at Aa3.
AXA Ireland Ltd - insurance financial strength at Aa3;
AXA Direct Insurance Ltd - insurance financial strength at Aa3;
AXA Equity and Law Life Assurance Society Plc - insurance financial
strength at Aa3;
AXA Royale Belge - insurance financial strength at Aa3;
AXA Leven NV - insurance financial strength at Aa3;
AXA Schade NV - insurance financial strength at Aa3;
AXA Sun Life Plc - insurance financial strength at Aa3.
The AXA group, headquartered in Paris, France, had total
consolidated assets of Euro 505 billion and shareholders' funds (including
minority interests) of Euro 23 billion at December 31, 1999.
AXA Financial, Inc., headquartered in New York,
reported total assets of $207.6 billion and shareholders
equity of $5.8 billion at March 31, 2000.
Visit our website at www.moodys.com/insurance.
Vice President - Sr Credit Offic
Financial Institutions Group
Moody's France S.A.
33 1 53 30 10 47
Robert P. Donohue
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service
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