AM Best has downgraded the ratings of AXA RE and revised its outlook to negative from stable
AM Best has downgraded the financial strength rating (FSR) to A- (Excellent) from A (Excellent) and the issuer credit rating (ICR) to “a-” from “a” of AXA RE (France). The outlook for the ratings has been revised to negative from stable.
The ratings of AXA RE reflect the fronting agreement with PARIS RE and the capital commitment of AXA (AXA RE’s ultimate parent) to AXA RE while the fronting agreement with PARIS RE is still in place.
AXA RE sold its reinsurance business to PARIS RE in December 2006, and the cession is retroactive as at 1 January 2006. AXA RE transferred the vast majority of its reserves (except asset-based reinsurance and part of the life portfolio in run-off) to PARIS RE through a 100% quota share agreement. AXA RE is acting as a fronting company to PARIS RE from 1 January 2006 until the end of September 2007, while the reserves prior to 1 January 2006 ceded to PARIS RE are guaranteed back by AXA and AXA RE.
CGRM (Compagnie Generale de Reassurance de Monte Carlo) was bought by PARIS RE early in January 2007, and the AXA RE Asia Pacific ownership transfer is to be finalised in July of this year.
The rating agency believes that AXA RE’s current risk-adjusted capitalisation is strong and supports the ratings. AXA RE will be in complete run off during the fourth quarter of 2007, once the fronting agreement with PARIS RE is to be fully terminated.
