Paris, May 09, 2014 -- Moody's Investors Service has today affirmed AXA's A2 senior unsecured
debt rating and A3/A3(hyb) subordinated debt ratings, as well as
the Aa3 insurance financial strength (IFS) ratings of AXA's main operating
subsidiaries. The rating agency has also changed the outlook to
stable from negative on all ratings.
A list of all affected ratings is available at the end of this press release.
RATINGS RATIONALE
Moody's affirmation of AXA's debt ratings reflects the group's
strong business profile combined with improvements in its financial profile
in the last two years. The change in outlook to stable from negative
reflects Moody's expectation that (1) AXA's actions in the
last five years, including the de-risking of the new business
in life insurance, the improvement in the P&C profitability
and the group's continued asset liability management discipline,
will continue to support a strong level of underlying earnings; and
(2) the global macroeconomic environment will continue to improve.
Nonetheless, given AXA's higher financial leverage and lower
capitalisation compared with those of Aa-rated peers, Moody's
considers AXA to be relatively weakly positioned within its rating category.
Moody's says that AXA's leading positions in many insurance
markets globally, its diversified distribution capabilities and
its diversified sources of earnings have enabled the group to report good
profitability with a low level of volatility in the last five years.
In 2013, AXA reported a growth in underlying earnings of 14%
(to €4.7 billion from €4.2 billion reported in
2012) and a growth in net income of 10% (to €4.5 billion
from €4.1 billion reported in 2012). These improvements
in profitability strengthened the group's balance sheet.
Nevertheless, AXA's financial profile, particularly capitalisation,
financial leverage (32% at year-end 2013 according to Moody's
calculations, down from 34% in 2012) and earnings coverage
(4.7x in 2013 according to Moody's calculation, up
from 4.0x in 2012), will likely remain at the lower-end
of or below Moody's usual expectations for a group whose main insurance
operating subsidiaries have Aa3 IFS ratings. In addition,
as a result of multiple acquisitions, Moody's views AXA's
capital quality as of relatively lower quality (goodwill represented 28%
of the group's reported shareholders' equity as of end-2013)
compared to Aa-peers.
Moody's views AXA's underlying profitability as a core credit strength,
and anticipates that AXA will continue to maintain a good level of underlying
profitability. Moody's believes that the following factors support
AXA's near-term profitability: (1) continued tariff adjustments
in the main P&C markets where the group operates; (2) its strategy
of reallocating capital to products with higher margins or that are less
sensitive to financial-markets movements (e.g.,
unit-linked, protection and health); and (3) the de-risking
of its life business in the US. Furthermore, the group's
disciplined asset liability management, as well as the spread between
its investments yield (3.7% in 2013 in the life segment)
and the average guaranteed rate on life policies (2.2%),
provides AXA with a strong ability to reduce credited rates to policyholders
and therefore to limit the negative impact of low interest rates on its
earnings. A gradual recovery in the global macroeconomic environment
and a gradual increase in interest rates will also likely support AXA's
profitability, although to a limited extent.
RATINGS OF SUBSIDIARIES
The affirmation of the Aa3 IFS ratings of AXA's main subsidiaries
in France (AXA France Vie and AXA France IARD), Switzerland (AXA
Versicherungen AG), the US (AXA Equitable Life Insurance Company),
Germany (DBV-Deutsche Beamten-Versicherung AG, AXA
Lebensversicherung AG, AXA Versicherung AG and AXA Krankenversicherung
AG), Belgium (AXA Belgium) and the UK (AXA Insurance UK plc) mirrors
the rating action on the holding's debt ratings. The ratings
of most of these entities benefit from one or two notches of implicit
support, reflecting their strong contribution to AXA's revenues
and profits and their strategic relevance to the group.
Moody's has affirmed the IFS rating of MONY Life Insurance Company
of America (MLOA), a US subsidiary, at A1 with a stable outlook.
The rating agency downgraded this rating by one notch on 2 October 2013
after AXA sold part of its business in the US and coinsured certain in-force
business of MLOA to an operating subsidiary of Protective Life Corporation
(Baa2 stable).
Moody's has also affirmed the IFS rating of AXA Insurance Ltd,
AXA's Irish subsidiary, at A2 with a stable outlook.
AXA Insurance Ltd's IFS rating remains constrained at the level of Ireland's
country ceiling.
Finally, Moody's has affirmed the A2 deposit rating of AXA Bank
Europe, and changed the outlook to stable from negative, in
line with that of the AXA group. This rating incorporates a four-notch
uplift from its baa3 standalone baseline credit assessment.
WHAT COULD CHANGE THE RATINGS
Downward pressure on the ratings could result from (1) a sustainable reduction
in profitability, prompting also a reduction in the earnings coverage
ratio; (2) weakened solvency or financial leverage position;
and/or (3) a deterioration in asset quality.
Upward pressure on the ratings is less likely in the short term given
the positioning of AXA's ratings within their category. In
the long term, however, upward pressure on the ratings could
result from (1) a sustained improvement in the group's capitalisation
level and quality; (2) a sustainable reduction in financial leverage
to below 30%; and (3) an improvement in earnings coverage
to the 8x-12x range.
LIST OF AFFECTED RATINGS
The following ratings have been affirmed and the outlook changed to stable
from negative:
AXA -- senior unsecured debt rating at A2;
AXA -- subordinated debt rating at A3/A3(hyb);
AXA -- junior subordinated debt rating at A3(hyb)/Baa1(hyb);
AXA France IARD -- insurance financial strength rating at
Aa3;
AXA France Vie -- insurance financial strength rating at
Aa3;
AXA Versicherungen AG -- insurance financial strength rating
at Aa3;
DBV-Deutsche Beamten-Versicherung AG -- insurance
financial strength rating at Aa3;
AXA Lebensversicherung AG -- insurance financial strength
rating at Aa3;
AXA Versicherung AG -- insurance financial strength rating
at Aa3;
AXA Krankenversicherung AG -- insurance financial strength
rating at Aa3;
AXA Belgium -- insurance financial strength rating at Aa3;
AXA Insurance UK plc -- insurance financial strength rating
at Aa3;
Guardian Royal Exchange plc -- backed senior unsecured debt
rating at A2;
AXA Financial, Inc. -- senior unsecured debt
rating at A2;
AXA Equitable Life Insurance Company -- insurance financial
strength rating at Aa3;
AXA Equitable Life Insurance Company -- surplus notes rating
at A2(hyb);
MONY Life Insurance Company of America -- insurance financial
strength rating at A1;
AXA Bank Europe -- bank deposit rating at A2.
The following rating has been affirmed with a stable outlook:
AXA Insurance Ltd -- insurance financial strength rating
at A2.
The following ratings have been affirmed:
AXA -- provisional senior unsecured MTN rating at (P)A2;
AXA -- provisional subordinated MTN rating at (P)A3;
AXA -- provisional junior subordinated MTN rating at (P)A3;
AXA -- commercial paper at P-1;
AXA Financial, Inc. -- provisional senior unsecured
shelf rating at (P)A2;
AXA Financial, Inc. -- provisional subordinated
shelf rating at (P)A3;
AXA Financial, Inc. -- provisional junior subordinated
shelf rating at (P)A3;
AXA Financial, Inc. -- backed commercial paper
at P-1;
AXA Financial Capital Trust I -- backed preference shares
shelf rating at (P)A3;
AXA Financial Capital Trust II -- backed preference shares
shelf rating at (P)A3;
AXA Financial Capital Trust III -- backed preference shares
shelf rating at (P)A3;
AXA Financial Capital Trust IV -- backed preference shares
shelf (P)A3.
PRINCIPAL METHODOLOGIES
The principal methodologies used in rating AXA, AXA France IARD,
AXA France Vie, AXA Versicherungen AG, AXA Lebensversicherung
AG, AXA Versicherung AG, AXA Krankenversicherung AG,
DBV-Deutsche Beamten-Versicherung AG and AXA Belgium were
Global Life Insurers published in December 2013, and Global Property
and Casualty Insurers published in December 2013. The principal
methodology used in rating AXA Insurance Ltd, Guardian Royal Exchange
plc and AXA Insurance UK plc was Global Property and Casualty Insurers
published in December 2013. The principal methodology used in rating
AXA Financial, Inc., AXA Equitable Life Insurance Company
and MONY Life Insurance Company of America was Global Life Insurers published
in December 2013. The principal methodology used in rating AXA
Bank Europe was Global Banks published in May 2013. Please see
the Credit Policy page on www.moodys.com for a copy of these
methodologies.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings of rated entity Guardian Royal Exchange plc was initiated
by Moody's and was not requested by this rated entities.
Rated entity Guardian Royal Exchange plc or its agent(s) participated
in the rating process. This rated entity or its agent(s),
if any, provided Moody's - access to the books,
records and other relevant internal documents of the rated entity.
The person who approved AXA Financial, Inc., AXA Equitable
Life Insurance Company, AXA Financial Capital Trust I, II,III
and IV and MONY Life Insurance Company credit ratings is Robert Riegel,
Managing Director, Insurance, JOURNALISTS: 44 20 7772
5456 SUBSCRIBERS: 44 20 7772 5454
The person who approved AXA, AXA France IARD, AXA France Vie,
AXA Versicherungen AG, DBV-Deutsche Beamten-Versicherung
AG, AXA Lebensversicherung AG, AXA Versicherung AG,
AXA Krankenversicherung AG, AXA Belgium, AXA Insurance UK
plc, Guardian Royal Exchange plc, and AXA Insurance Ltd credit
ratings is Simon Harris, Managing Director, Insurance,
JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454
The person who approved AXA Bank Europe credit rating is Carola Schuler,
Managing Director, Banking, JOURNALISTS: 44 20 7772
5456 SUBSCRIBERS: 44 20 7772 5454
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead analyst and the Moody's legal entity that has issued the ratings.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Benjamin Serra
Vice President - Senior Analyst
Financial Institutions Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Simon Harris
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's affirms AXA's A2 senior debt rating and changes outlook to stable