Press Release - DECEMBER 06, 2018
AM Best Removes From Under Review With Developing Implications and Affirms Credit Ratings of AXA Global Re
FOR IMMEDIATE RELEASE
LONDON - DECEMBER 06, 2018
In March 2018, the ratings of AGRe were placed under review with developing implications following AXA S.A.’s (AXA or the group) announcement that it had entered into an agreement to acquire 100% of XL Group Ltd (XL) for a cash consideration of USD 15.3 billion (EUR 12.4 billion). The latest rating actions follow the completion of this transaction, on 12 September 2018, and the conclusion of AM Best’s assessment of its impact on the credit fundamentals of the group and its rated subsidiaries. In AM Best’s opinion, the execution risk associated with the acquisition has been partially alleviated, as completion of the transaction and integration to date has been in line with expectations. Furthermore, although the transaction has resulted in an increase in financial leverage for AXA, AM Best expects this situation to be temporary, as the group has presented a clear plan to reduce leverage over the coming years. AXA is expected to maintain a very strong balance sheet, strong operating performance, although the XL business has the potential to introduce some volatility, a very favourable business profile and very strong enterprise risk management (ERM).
The ratings reflect AGRe’s balance sheet strength, which AM Best categorises as adequate, as well as its adequate operating performance, neutral business profile and very strong enterprise risk management (ERM).
The ratings also reflect lift due to AGRe’s strategic importance to AXA as the group’s internal reinsurance platform and centre of underwriting expertise. AGRe plays a fundamental role in the optimisation of the AXA group’s capital resources through internal risk transfer and the securing of external reinsurance for all business segments. AGRe also centralises the group’s reinsurance and underwriting governance.
AGRe’s adequate balance sheet strength assessment factors in the company’s solvency position as assessed by its internal capital model used for the purposes of Solvency II, together with its liquid investment portfolio and history of prudent reserving practices. AGRe further benefits from strong financial flexibility due to its importance to the AXA group, and AM Best expects AXA to provide prompt and sufficient support to the company if needed.
AGRe has a track record of solid non-life underwriting results, as evidenced by a five-year weighted average combined ratio of 96.3% (2013-2017). AM Best also views AGRe’s ERM as very strong as it is deeply integrated within AXA’s underwriting operations and ERM function.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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