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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