AM Best Removes From Under Review With Developing Implications and Affirms Credit Ratings of AXA Corporate Solutions Brasil e América Latina Resseguros S.A.

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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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Business Wire: 18:36 GMT Thursday 6th December 2018

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