AM Best Removes From Under Review, Affirms Credit Ratings of AXA Equitable Life Insurance Co. and Most of Its Life Subsidiaries
December 18, 2018 by A.M. Best
Oldwick – AM Best has removed from under review with developing implications and has affirmed the Financial Strength Rating (FSR) of A and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a+” of AXA Equitable Life Insurance Company (AXA Equitable) (New York, NY). Concurrently, AM Best has assigned a Long-Term ICR of “bbb+” to AXA Equitable Holdings, Inc. (headquartered in New York, NY) and Long-Term Issue Credit Ratings (Long-Term IR) of “bbb+” to the senior debt securities issued concurrent with the company’s recent initial public offering (IPO). The outlook assigned to these Credit Ratings (ratings) is stable. Please see below for a detailed list of the companies and ratings.
In March 2018, the ratings of AXA Financial, Inc. and its life insurance subsidiaries were placed under review with developing implications following AXA S.A.’s announcement that the group 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). Subsequently, in May 2018, AXA S.A. executed a partial IPO of AXA Equitable Holdings, Inc., a new U.S. holding company with and into which the former AXA Financial, Inc. was merged. This rating action follows the completion of this partial IPO of the U.S. operations, the completion of the XL transaction on Sept. 12, 2018, a secondary offering by AXA S.A. of AXA Equitable Holdings, Inc. common stock in November 2018, and the conclusion of AM Best’s assessment of the impact of these events on the credit fundamentals of the group and its rated subsidiaries.
The ratings reflect AXA Equitable’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).
AXA Equitable’s rating affirmations are attributable to its very strong and improved risk-adjusted capitalization, strong financial flexibility, sophisticated risk management practices and its position as a leading variable annuity (VA) and universal life writer and global asset manager. AM Best notes that in advance of AXA Equitable Holdings, Inc.’s partial IPO earlier this year, AXA S.A. made a capital contribution of more than $2 billion to the U.S. operations, resulting in a material improvement in its stand-alone risk-adjusted capital position. AXA Equitable also benefits from a diversified and productive distribution model, which includes a recently increased ownership stake in AllianceBernstein (AB), a large publicly traded global investment management firm.
AM Best notes the company’s action pre-IPO to recapture its VA business from its captive reinsurer creates greater transparency on VA liabilities and associated assets. Also, AXA Equitable post-IPO continues to maintain an appropriate ERM framework with a focus on hedging strategies to protect its statutory and economic capital. In anticipation of being a stand-alone U.S. entity, the company has updated its economic capital model to be more U.S. centric by shifting away from Solvency II framework to a U.S. economic and risk-based capital/contingent tail expectation-centric capital model.
While AXA Equitable intends to maintain its very strong risk-adjusted capital profile going forward, it remains exposed to equity market pressures on both sides of the balance sheet. These pressures emanate from its investment in AB and through its variable insurance products with guaranteed benefits, as well as potential volatility in revenue from asset fees as a result of market value changes in its large separate account book of business and derivative activity. AM Best notes that the exposure from VA guarantees is managed effectively through reinsurance and hedging programs. In recent years, AXA Equitable has developed and introduced new and innovative products with the objective of offering a more balanced and diversified product portfolio while reducing product design risk. More recently, the company is looking to expand its product offering with product solutions tailored to the employee benefits marketplace. Additionally, asset risk consists of a well-diversified portfolio of invested assets, which are considered to be well-managed.
AM Best notes that a deviation of methodology applies to the determination of the ratings of the following four subsidiaries of AXA Equitable. These subsidiaries were afforded rating enhancement from AXA Equitable despite the fact that it is not currently the lead rating unit as defined by Best’s Credit Rating Methodology (BCRM). AXA S.A. (the ultimate parent), which is currently the lead rating unit for the group, has publicly made its intention clear to divest its majority interest in the U.S. operations over the near term, at which point it is AM Best’s expectation that AXA Equitable will become the lead rating unit, enabling it to afford rating enhancement to these four subsidiaries as per BCRM.
The FSR of A (Excellent) and the Long-Term ICR of “a” have been affirmed and assigned a stable outlook for MONY Life Insurance Company of America (Phoenix, AZ), another subsidiary of AXA Equitable.
The FSR of B+ (Good) and the Long-Term ICR of “bbb-” have been affirmed and assigned a stable outlook for AXA Corporate Solutions Life Reinsurance Company (Delaware).
The FSR of A (Excellent) and the Long-Term ICR of “a” have been affirmed and a stable outlook assigned for U.S. Financial Life Insurance Company (Cincinnati, OH).
The ratings have been removed from under review with developing implications and the FSR has been downgraded to B++ (Good) from A- (Excellent) and the Long-Term ICR downgraded to “bbb” from “a-” and assigned a stable outlook for AXA Equitable Life and Annuity Company (Denver, CO).
The following Long-Term IR has been removed from under review with developing implications, affirmed and assigned a stable outlook:
AXA Financial, Inc.—
— “bbb+” on $350 million 7% senior unsecured debentures, due 2028
The following Long-Term IRs have been assigned with a stable outlook:
AXA Equitable Holdings, Inc.
— “bbb+” on $1.5 billion 5% senior unsecured debentures, due 2048
— “bbb+” on $1.5 billion 4.35% senior unsecured debentures, due 2028
— “bbb+” on $800 million 3.9% senior unsecured debentures, due 2023
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.
AM Best is a global rating agency and information provider with a unique focus on the insurance industry.
BN-NJ-12-17-2018 1420 ET #
