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Rating Action:

Moody's affirms AXA's A2 senior debt rating with a negative outlook

30 Apr 2013

Paris, April 30, 2013 -- Moody's Investors Service has today affirmed AXA's A2 senior unsecured debt rating and A3 subordinated debt rating, as well as the Aa3 insurance financial strength ratings of AXA's main operating subsidiaries. Moody's maintained a negative outlook on all these ratings.

A list of all the ratings affected by this rating action is available at the end of this press release.

RATINGS RATIONALE

Moody's affirmations reflect AXA's strong business profile, with leading positions in many insurance markets globally, combined with a good financial profile. However, in Moody's opinion, certain aspects of AXA's financial profile, particularly capitalization and financial leverage, have been and remain consistently weaker than Aa-rated peers. Although these aspects are somewhat mitigated by AXA's good and stable profitability, and by recent improvements in leverage and capitalization metrics, their weakness continues to pressure the group's ratings. The negative outlook reflects the weakness of AXA's positioning within its rating category, which leaves it vulnerable to a rating downgrade if profitability, asset quality, or capitalization were to be adversely impacted by economic pressures evident in the group's main markets, including deterioration in the credit quality of some large European sovereigns.

AXA'S CREDIT POSITIONING

AXA's business profile continues to be supported by leading market positions in France, Switzerland, Belgium and strong market positions in the US, Germany and the UK. More recently, the group has been active in adjusting its business profile, through retrenching from markets or business lines where it believes returns or growth prospects are poor (e.g., part of the UK life savings, Canadian property and casualty insurance, Australian and New Zealand life insurance), and redeploying capital to higher-growth and higher-margin areas (e.g., health and protection globally, selected Asian markets). Moody's believes that the strategy to focus on higher margins and products less sensitive to financial-markets movements should contribute to gradually strengthen the group's profitability. However, the rating agency says that one of the risks associated with this strategy would be a failure to convert the capital allocated to these new products into recurrent earnings over time.

Commenting further on AXA's financial profile, Moody's mentioned that capitalization (Solvency I ratio of 233% at year-end 2012, including unrealized gains and losses on investments), financial leverage and earnings coverage (respectively at around 35% and 4.5x in 2012, on Moody's basis, including adjustments for pensions and operating leases)remain at weaker levels than Moody's would expect for Aa-rated companies. In addition, AXA's capital quality, as a result of multiple acquisitions, is of a relatively low quality: goodwill and value of purchased life business in force represented 33% of shareholders' equity as at end 2012. However, the rating agency adds that the good and recurrent underlying profitability has contributed to stabilise these metrics in the last five years. AXA's underlying earnings have been very stable (with underlying earnings ranging from EUR3.8 billion to EUR4.0 billion between 2008 and 2011 and growing to EUR4.3 billion in 2012, with an average of EUR4.0 billion between 2008 and 2012), combined ratio has consistently improved in the last three years (to 97.6% in 2012) and life earnings continue to be refocused from spread-based business towards insurance margin and fee income business (with investment margin representing only 26% of AXA's life insurance gross margin in 2012).

Moody's sees AXA's underlying profitability as a core credit strength, and anticipates that AXA will continue to maintain a good level of underlying profitability in 2013, despite the weak economic environment and the low level of interest rates. Moody's believes that AXA's profitability will be supported by diversified sources of earnings, in line with its strategy of reallocating capital to high margin, high growth areas, as well as the group's conservative asset liability management practices. Nonetheless, Moody's believes that further deterioration in the economic environment would have a negative impact not only on AXA's ability to develop new business, but also on the group's ability to maintain margins at their current level. A deterioration in profitability would in turn negatively affect AXA's earnings coverage and financial flexibility. The negative outlook on AXA's ratings reflects this risk and is in line with Moody's view that macro-economic downside risks remain important, especially in Europe, as evidenced by Moody's negative outlook on many European sovereigns.

Downside risks could for example stem from a deterioration in the credit quality of Spain (Baa3, negative) or Italy (Baa2, negative). Moody's says that although AXA does not maintain any significant operational concentration risk to these countries (AXA generates around 4% of its revenues in Spain and 6% in Italy), and asset exposures to these countries remain limited (AXA holds around 4% of its investments in Italian sovereign and banking bonds and 2% in Spanish sovereign and banking bonds), Moody's mentioned that the indirect impacts, due to the knock-on effects of a deterioration in the credit quality of Spain and Italy on the credit quality and the economic environment of other sovereigns, would likely be substantial.

WHAT COULD CHANGE THE RATING

Downwards pressure might develop on the ratings following (1) a sustainable reduction in profitability below 2012 levels, also prompting a fixed charge coverage ratio substantially below 5x; (2) a deterioration in the credit quality of large European sovereigns, as evidenced, for example, by a deterioration in the credit quality of Spain or Italy; and (3) a weakened solvency or financial leverage position.

Upwards rating pressure is unlikely in the short-term, given the current negative outlook. A stabilisation of the outlook for AXA's ratings could occur if (1) the risks of deterioration in AXA's profitability were reduced significantly; (2) if the Group's capitalization level and quality showed a sustained improvement; or (3) if financial leverage were to reduce sustainably to below 30% and earnings coverage improved concurrently.

Moody's adds that should the outlooks on the current Spanish and Italian sovereign ratings change to stable from negative, AXA's rating outlook would not necessarily move in tandem, because of the challenges for AXA's intrinsic credit profile.

LIST OF RATINGS

The following ratings have been affirmed with a negative outlook:

AXA -- senior unsecured debt rating at A2;

AXA -- subordinated debt rating at A3(hyb);

AXA -- subordinated debt rating at A3;

AXA -- junior subordinated debt rating at 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-Winterthur Lebensversicherung AG -- insurance financial strength rating at Aa3;

DBV-Winterthur Versicherung 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 Insurance Ltd -- insurance financial strength rating at A3;

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).

The following ratings have been affirmed with no outlook:

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.

The methodologies used in these ratings were Moody's Global Rating Methodology for Life Insurers published in May 2010, Moody's Global Rating Methodology for Property and Casualty Insurers published in May 2010, and Moody's Guidelines for Rating Insurance Hybrid Securities and Subordinated Debt published in January 2010. 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.

Guardian Royal Exchange plc rating was initiated by Moody's and was not requested by the rated entity.

Guardian Royal Exchange plc rated entity or its agent(s) participated in the rating process. The rated entity or its agent(s) provided Moody's access to the books, records and other relevant internal documents of the rated entity.

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.

The person who approved AXA Financial, Inc., AXA Equitable Life Insurance Company, AXA Financial Capital Trust I, II,III and IV 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-Winterthur Lebensversicherung AG, DBV-Winterthur Versicherung 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, AXA Insurance Ltd, AXA Financial, Inc., AXA Equitable Life Insurance Company credit ratings is Simon Harris, Managing Director, Insurance, JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454

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 with a negative outlook
No Related Data.
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