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
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