MOODY'S LOWERS DEBT RATINGS OF AXA (SENIOR TO A2 FROM A1); STABLE OUTLOOK ON Aa3 FINANCIAL STRENGTH RATING OF CORE OPERATING SUBSIDIARIES AND THEIR DEBT RATINGS
Approximately $8 billion of Debt Securities Affected.
Paris, March 19, 2003 -- Moody's Investors Service today lowered the debt ratings of AXA
to A2 from A1 for senior debt, and to A3 from A2 for subordinated
and junior subordinated debt, reflecting a revision of Moody's
notching practice for European insurance groups. The outlook on
AXA's debt ratings is now stable. The rating agency also
confirmed with a stable outlook the Aa3 insurance financial strength rating
of the group's core operating units as well as the Prime-1
short-term debt rating for AXA.
Moody's said that the downgrade of AXA's debt ratings was
primarily driven by the rating agency's decision to increase to
two notches the notching between the group's financial strength
ratings on operating companies and AXA's debt rating. The
rating agency's change in its insurance rating methodology was disclosed
in a press release dated December 17, 2002, that highlighted
Moody's increased emphasis on expected loss and the widening of
its typical notching spread from two to three notches.
Moody's commented that the key analytical dimensions considered
when deciding to have AXA's debt ratings two notches below its financial
strength ratings were as follows:
(i) AXA's superior diversification, with major operations
in Western Europe, the U.S., the Asia Pacific
region, and with significant operations in life and non-life
insurance and in asset management.
(ii) The robustness of the earnings power of some of AXA's core
operations, mitigated by the current weaker performance of some
units and the impact that more volatile equity markets may continue to
have on profitability.
(iii) The group's low risk profile, underpinned by high bond
asset quality, sound reserving practices and the divestment or refocusing
of some of its riskier activities.
(iv) AXA's diminished capital position due to weaker equity markets
and its relatively high debt leverage, somewhat compensated by its
prudent financial and liquidity management, as well as on-going
efforts to enhance financial flexibility.
(v) Finally, the fact that the group is subject to regulatory supervision
on a consolidated basis was also viewed positively in Moody's analysis.
Moody's further commented that the stable rating outlook on the
insurance financial strength ratings of the group's core operating units
(AXA France, AXA Financial in the U.S., AXA
UK, AXA Germany and AXA Belgium) remained predicated by their leading
positions in their respective markets, sound solvency levels,
good investment quality, and the outlook for improved profitability
as the effect of rationalisation measures and premium increases in non-life
insurance activities gradually filter through earnings.
Moody's concluded that it will continue to monitor how AXA may over
time upgrade its operating performance by leveraging its superior franchise
and its on-going streamlining of its organisation should capital
markets and the economic environment stabilise. Meanwhile,
the outlook on the group's core ratings is stable.
The following ratings were lowered:
AXA -- senior debt to A2 from A1, subordinated and junior subordinated
debt to A3 from A2;
AXA Financial Inc. -- senior debt to A3 from A2, prospective
subordinated and junior subordinated debt to Baa1 from A3;
AXA Financial Capital Trust I -- prospective preferred stock to Baa1
AXA Financial Capital Trust II -- prospective preferred stock to
Baa1 from A3;
AXA Financial Capital Trust III -- prospective preferred stock to
Baa1 from A3;
AXA Financial Capital Trust IV -- prospective preferred stock to
Baa1 from A3.
The following ratings were confirmed with stable outlooks:
AXA -- French commercial paper at Prime-1;
AXA France Collectives -- financial strength at Aa3;
AXA France IARD -- financial strength at Aa3;
AXA France Vie -- financial strength at Aa3;
Equitable Life Assurance Society of the U.S. -- financial
strength at Aa3 and surplus notes at A2;
AXA Lebensversicherung -- financial strength at Aa3;
AXA Versicherung -- financial strength at Aa3;
AXA General Insurance Ltd -- financial strength at Aa3;
AXA Direct Insurance Ltd -- financial strength at Aa3;
AXA Life Plc -- financial strength at Aa3;
AXA Sun Life Assurance Society Plc -- financial strength at Aa3;
AXA Sun life Pensions Management Ltd -- financial strength at Aa3;
AXA Sun Life Unit Assurance Ltd -- financial strength at Aa3;
AXA Ireland -- financial strength at Aa3;
AXA Insurance UK Plc -- financial strength at Aa3;
AXA Belgium -- financial strength at Aa3.
The following ratings were confirmed but continue to have a negative rating
AXA Leven -- financial strength at Aa3;
AXA Schade -- financial strength at Aa3.
The following rating remains on review for possible downgrade:
AXA Konzern AG (Austria) -- financial strength at Aa3;
AXA, headquartered in Paris, France, had total consolidated
assets of 445 billion and shareholders' funds of 26.5
billion at December 31, 2002.
Financial Institutions Group
Moody's Investors Service Ltd.
44 20 7772 5454
Senior Vice President
Financial Institutions Group
Moody's France S.A.
33 1 53 30 10 20