A.M. Best Revises Outlook to Negative for AXA Financial, Inc. and Its Subsidiaries
June 12 2009 - 4:50PM
Business Wire
A.M. Best Co. has revised the outlook to negative from
stable and affirmed the financial strength rating (FSR) of A+
(Superior) and issuer credit ratings (ICR) of �aa-� of certain life
insurance subsidiaries of AXA Financial, Inc. (AXA
Financial) (New York, NY) including its lead operating subsidiary,
AXA Equitable Life Insurance Company (AXA Equitable) (New
York, NY). Concurrently, A.M. Best has revised the outlook to
negative from stable and affirmed the ICR of �a-� of AXA Financial
and the group�s existing debt ratings. AXA Financial is a
subsidiary of AXA S.A. (Paris, France) (NYSE: AXA). (See
below for a detailed listing of the companies and ratings.).
The revised outlook reflects the significant declines in assets
under management within AXA Financial�s variable life and annuity
lines, as well as in its AllianceBernstein (AB) asset management
affiliate. In addition, while AXA Equitable�s risk-adjusted capital
did not deteriorate materially, its absolute level of statutory
adjusted capital and surplus significantly declined due primarily
to unrealized investment losses related to AXA Equitable�s holdings
in AB and reserve increases associated with its variable annuity
secondary guarantees. A.M. Best notes that the decline in statutory
adjusted capital and surplus was partially offset by $1 billion in
new surplus notes issued by AXA Equitable to AXA Financial. AXA
Equitable also completed a significant reinsurance transaction with
its AXA Bermuda affiliate. Furthermore, AXA Equitable�s dependence
on equity-linked products is expected to result in lower operating
earnings capacity over the near term and has led to a contraction
of some of its core business lines.
The ratings reflect AXA Financial�s industry position as one of
the leading variable annuity writers, a top-ten global asset
manager and an integral part of AXA S.A., a worldwide leader in
financial protection and wealth management. Its financial
advisory/insurance segment has diverse distribution channels, which
have allowed AXA Financial to maintain a competitive position among
the industry leaders, despite recent declines in its variable
annuity and individual life market shares. The segment continues to
generate solid GAAP pre-tax earnings, driven primarily by
asset-based fee income from separate account products. The
investment management segment, through its 63% ownership of AB, is
a contributor to the group�s earnings and adds product
diversification. A.M. Best believes AB has a well-diversified
business model across product type, global asset allocation, client
type and client location.
Historically, AXA Financial has been a significant source of
capital for its parent through regular dividends, although no
dividend was paid in 2008 as a result of the group�s statutory
surplus decline. In addition, AXA Financial remains exposed to
further declines in the equity markets on both sides of the balance
sheet, through its investment in AB and variable insurance products
with secondary guarantees, as well as to reduced revenues from
asset fees related to separate account investments. A.M. Best also
notes that the risk from variable annuity guarantees is largely
mitigated by the group�s reinsurance and hedging programs.
Nevertheless, the current recessionary economic environment will
challenge AXA Financial to regain profitability and sales
momentum.
The outlook has been revised to negative from stable, and the
FSR of A+ (Superior) and ICRs of �aa-� have been affirmed for the
following subsidiaries of AXA Financial, Inc.:
- AXA Equitable Life Insurance
Company
- MONY Life Insurance
Company
- MONY Life Insurance Company
of America
The outlook has been revised to negative from stable, and the
FSR has been downgraded to A (Excellent) from A+ (Superior) and the
ICR to �a+� from �aa-�for AXA Equitable Life and Annuity
Company. For more than two years, this company has not issued
new business.
The outlook has been revised to negative from stable, and the
FSR of A (Excellent) and ICR of �a+� have been affirmed for U.S.
Financial Life Insurance Company.
The outlook has been revised to negative from stable, and the
debt ratings have been affirmed for the following companies:
AXA Financial, Inc.�
-- �a-� on $480 million 7.75% senior unsecured notes, due
2010
-- �a-� on $350 million 7% senior unsecured debentures,
due 2028
The MONY Group, Inc. (assumed by AXA Financial,
Inc.)�
-- �a-� on $300 million 8.35% senior unsecured notes, due
2010
AXA Equitable Life Insurance Company�
-- �a� on $200 million 7.7% surplus notes, due 2015
For Best�s Ratings, an overview of the rating process and rating
methodologies, please visit www.ambest.com/ratings.
The principal methodologies used in determining these ratings,
including any additional methodologies and factors, which may have
been considered, can be found at
www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is a global full-service
credit rating organization dedicated to serving the financial and
health care service industries, including insurance companies,
banks, hospitals and health care system providers. For more
information, visit www.ambest.com.
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