S&P Cuts AXA Group Entities to ‘AA-‘; Outlook Stable

PARIS--(BUSINESS WIRE)--Standard & Poor's--Feb. 12, 2003--Standard & Poor's Ratings Services said today that it had lowered all insurer financial strength and counterparty credit ratings on the core operating companies of Paris-based global insurance and asset management group AXA to 'AA-' from 'AA' reflecting an expected reduction in the group's 2002 operating earnings growth, as well as its diminished financial flexibility and eroded capitalization.  
 
At the same time, Standard & Poor's lowered to 'A' from 'A+' its counterparty credit and senior unsecured debt ratings on the group's top holding company, AXA. In addition, the outlook on all long-term counterparty credit ratings on AXA is stable.  
 
The ratings on the AXA group's core insurance companies are based on its extremely strong business position; very strong, albeit decreased, capitalization and financial flexibility; and strong operating performance. "In our view, the AXA group's efforts to increase operating earnings by 20% in 2002 were undermined by the continuing decline in equity markets," said Standard & Poor's credit analyst Yann Le Pallec. "The group is, however, believed to have successfully managed to counterbalance to a large extent the effect of equity market weakness, mainly through an impressive and successful cost cutting plan and a significant reduction of its combined ratio in its retail property-casualty business. This clearly illustrates management's ability to leverage the entire organization so as to adapt to adverse operating conditions."  
 
An increasing contribution from property-casualty lines to operating earnings is likely to counterbalance tighter margins in life and savings during the next few months, owing to current low interest rates, which are at a historic low and which are expected curb the earnings recovery rate. Operating earnings should therefore gradually improve from their present level, with the retail property-casualty combined ratio reaching 104% by 2003. Capitalization is expected to stay in the low 'AA' range in the medium term. "Business growth is likely to remain stable, or even exceed 5% per annum, given the favorable pricing conditions in property-casualty. European life should experience continued erosion if equity markets remain at their currently depressed levels, but this is expected to be offset by strong new business growth in the U.S. and Japan," added Mr. Le Pallec.  
 
Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Fixed Income in the left navigation bar, select Credit Ratings Actions. Alternatively, call one of the Standard & Poor's Ratings Desks: London (44) 20-7847-7400; Paris (33) 1-4420-6705; Frankfurt (49) 69-33-999-223; Stockholm (46) 8-440-5916