AM Best Removes From Under Review With Developing Implications & Affirms Credit Ratings of AXA Corporate Solutions Brasil e A...
December 06 2018 - 01:36PM
Business Wire
AM Best has removed from under review with developing
implications and affirmed the Financial Strength Rating of B++
(Good) and the Long-Term Issuer Credit Rating of “bbb” of AXA
Corporate Solutions Brasil e América Latina Resseguros S.A. (AXA CS
Latam) (Brazil). The outlook assigned to these Credit Ratings
(ratings) is stable.
In March 2018, the ratings of AXA CS Latam 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 Sept. 12, 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
favorable business profile and very strong enterprise risk
management (ERM).
The ratings reflect AXA CS Latam’s balance sheet strength, which
AM Best categorizes as adequate, as well as its adequate operating
performance, neutral business profile and appropriate ERM.
The ratings take into consideration the benefits AXA CS Latam
received as a result of being integrated into AXA’s corporate
solutions segment, led by AXA CS Assurance S.A. AXA is a strong
global organization with strong brand recognition, broad product
offering, global systems and solid risk management infrastructure.
The ratings also factor AXA CS Latam’s strategic importance to AXA
through access to Latin America’s largest economy. The ratings also
reflect the capital support via capital increases and the
intergroup reinsurance support provided to AXA CS Latam, which
protects AXA CS Latam’s balance sheet and risk-adjusted
capitalization. Despite the group’s significant resources and
business plan, AXA CS Latam will be challenged to profitably build
out its operations in Brazil’s highly competitive (re)insurance
market. Additionally, Brazil is still going through challenging
economic and political conditions, which could increase operational
and execution risk if much-needed reforms are not instituted in a
reasonable time frame.
Factors that could have a positive impact on AXA CS Latam’s
ratings are sustained and stable profitability, improved
risk-adjusted capitalization or an additional enhancement from the
company’s ultimate parent.
Factors that could have a negative impact on AXA CS Latam’s
ratings include the lack of support from the parent organization,
sustained material volatility in operating performance or
deterioration in risk-adjusted capitalization. Other factors that
potentially could have a negative impact on the ratings are the
company’s inability to meet its profitability targets or a
downgrade of Brazil’s country risk tier.
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. Visit
www.ambest.com for more information.
Copyright © 2018 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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Guilherme (Guy) Monteiro SimoesSenior Financial
Analyst+1 908 439 2200, ext.
5301guy.simoes@ambest.com
Scott ManganAssociate Director+1 908 439 2200,
ext. 5593scott.mangan@ambest.com
Christopher SharkeyManager, Public Relations+1
908 439 2200, ext. 5159christopher.sharkey@ambest.com
Jim PeavyDirector, Public Relations+1 908 439
2200, ext. 5644james.peavy@ambest.com