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  • Moody’s downgrades AXA Financial’s ratings following AXA’s continued pursuit of a partial IPO

    November 15, 2017 by Moody's

    New York, November 14, 2017 — Moody’s Investors Service today has downgraded the insurance financial strength (IFS) ratings of AXA Equitable Life Insurance Company (AXA Equitable) and MONY Life Insurance Company of America (MLOA) to A2 from A1, and downgraded the senior unsecured debt rating of AXA Financial Inc. (AXA Financial) to Baa2 from Baa1 reflecting the removal of one notch of uplift related to implicit support provided by AXA SA (AXA; A2 senior unsecured debt). This rating action follows yesterday’s form S-1 filing by AXA US, which indicates AXA SA’s continued pursuit of a partial IPO of its US business and plans for the AXA US business to operate as a stand-alone entity. The outlooks of AXA Equitable, MLOA, and AXA Financial have been changed to stable from negative. Please refer to the complete list of rating actions below.

    RATINGS RATIONALE

    The downgrade of AXA Equitable, MLOA, and AXA Financial is driven by the removal of the one notch of uplift associated with assumed financial support from AXA SA. This downgrade reflects uncertainty regarding the degree of ongoing support the AXA US business will receive from the parent. Although AXA SA still intends to hold a majority of the AXA US business after the anticipated partial IPO, at least initially, the partial IPO weakens the support provided by the group to the US company. Further, the filing of the S-1 and the plans for the AXA US business to operate as a standalone entity demonstrate that the US operations are a non-core business for AXA SA.

    The ratings of AXA Financial and its insurance operating subsidiaries are based on well-established positions in individual annuity and life insurance, particularly in the individual retirement, life insurance, 403(b) savings and estate planning markets. The ratings also reflect the company’s utilization of diversified distribution channels including a strong captive agency force, as well as its diversified earnings that benefit from economies of scale and solid capital.

    RATING DRIVERS

    The following could lead to upward pressure on the ratings of AXA Equitable and MLOA: 1) successful execution of the operation of the US business as a standalone entity, reflected by sustained sales; 2) return-on-capital (ROC) consistently greater than 8%; and 3) successful runoff of legacy business.

    The following could lead to a downward pressure on the ratings: 1) consolidated RBC ratio falling below 350% (on a company action level basis); and 2) cash flow coverage and earnings coverage consistently below 3x and 5x, respectively.

    The following rating was affirmed:

    AXA Financial, Inc. — backed commercial paper at P-1

    The following ratings have been downgraded:

    MONY Life Insurance Company of America — insurance financial strength rating to A2 from A1;

    AXA Equitable Life Insurance Company — insurance financial strength rating to A2 from A1;

    AXA Financial, Inc. — senior unsecured debt rating to Baa2 from Baa1;

    AXA Financial, Inc. — provisional senior unsecured shelf rating to (P)Baa2 from (P)Baa1;

    AXA Financial, Inc. — provisional subordinated shelf rating to (P)Baa3 from (P)Baa2;

    AXA Financial, Inc. — provisional junior subordinated shelf rating to (P)Baa3 from (P)Baa2;

    AXA Financial Capital Trust I — backed preference shares shelf rating to (P)Baa3 from (P)Baa2;

    AXA Financial Capital Trust II — backed preference shares shelf rating to (P)Baa3 from (P)Baa2;

    AXA Financial Capital Trust III — backed preference shares shelf rating to (P)Baa3 from (P)Baa2; and

    AXA Financial Capital Trust IV — backed preference shares shelf rating to (P)Baa3 from (P)Baa2.

    The outlook on all issuers has been changed to stable from negative.

    The principal methodology used in these ratings was Global Life Insurers published in April 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

    AXA Equitable is headquartered in New York. As of June 30, 2017, AXA Equitable reported total assets of $214.9 billion and total equity of $17.6 billion.

    REGULATORY DISCLOSURES

    For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

    For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

    Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

    Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.

    Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

    Michael Fruchter
    VP – Senior Credit Officer
    Financial Institutions Group
    Moody’s Investors Service, Inc.
    250 Greenwich Street
    New York, NY 10007
    U.S.A.
    JOURNALISTS: 1 212 553 0376
    Client Service: 1 212 553 1653

    Marc R. Pinto, CFA
    MD – Financial Institutions
    Financial Institutions Group
    JOURNALISTS: 1 212 553 0376
    Client Service: 1 212 553 1653

    Releasing Office:
    Moody’s Investors Service, Inc.
    250 Greenwich Street
    New York, NY 10007
    U.S.A.
    JOURNALISTS: 1 212 553 0376
    Client Service: 1 212 553 1653

     
     
     
    © 2017 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved. 

    CREDIT RATINGS ISSUED BY MOODY’S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE. 

    MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER. 

    ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT. 

    All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY’S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY’S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications. 

    To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S. 

    To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information. 

    NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER. 

    Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.comunder the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.” 

    Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be reckless and inappropriate for retail investors to use MOODY’S credit ratings or publications when making an investment decision. If in doubt you should contact your financial or other professional adviser

    Additional terms for Japan only: Moody’s Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody’s Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively. 

    MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000. 

    MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

    Originally Posted at Moody's on November 14, 2017 by Moody's.

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