AM Best Takes Various Credit Rating Actions on AXA Equitable Holdings, Inc. and Its Life Subsidiaries
December 23, 2019 by A.M. Best
OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “a+” from “a” and affirmed the Financial Strength Rating (FSR) of A (Excellent) of MONY Life Insurance Company of America (MLOA) (Phoenix, AZ). Concurrently, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a+” of AXA Equitable Life Insurance Company (AXA Equitable) (New York, NY). MLOA and AXA Equitable are referred to collectively as AXA Equitable Group. The outlook of these Credit Ratings (ratings) is stable.
Additionally, AM Best has downgraded the FSR to A- (Excellent) from A (Excellent) and the Long-Term ICR to “a-” from “a” of U.S. Financial Life Insurance Company (USFL) (Cincinnati, OH). At the same time, AM Best has placed the ratings of USFL under review with negative implications. AXA Equitable Holdings recently announced a definitive agreement to sell USFL to Heritage Life Insurance Company, with that transaction expected to close in early 2020, subject to regulatory approval and the satisfaction of other closing conditions. Heritage Life Insurance Company is not currently rated by AM Best. The under review status of USFL’s ratings will be resolved once the transaction has successfully closed and AM Best has reviewed the strategic and financial plans for the company under its new ownership.
AM Best has also affirmed the Long-Term ICR of “bbb+” of AXA Equitable Holdings, Inc. (headquartered in New York, NY) and all Long-Term Issue Credit Ratings (Long-Term IR). The outlook of these ratings is stable. Please see below for a detailed list of ratings of other subsidiaries and Long-Term IRs.
AXA Equitable Group’s ratings reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).
USFL’s ratings reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate ERM.
AXA Equitable Group’s ratings are attributable to its very strong and improved risk-adjusted capitalization, strong financial flexibility, well-developed risk management practices and its position among the market leaders in variable annuities (VA), universal life and 403(b) retirement annuities. Additionally, through its Alliance Bernstein affiliate, the group maintains a significant global asset management footprint, which provides a material source of unregulated cash flow to the holding company. Consolidated financial leverage at AXA Equitable Holdings is considered to be moderate, supported by strong interest coverage.
AM Best notes that in advance of AXA Equitable Holdings, Inc.’s partial initial public offering year in September 2018, AXA S.A. made a capital contribution of more than $2 billion to the U.S. operations, resulting in a material improvement in its stand-alone risk-adjusted capital position. Effective Dec. 12, 2019, AXA S.A.’s ownership in AXA Equitable decreased to below 10% of the outstanding common stock. AM Best also notes that the holding company maintains access to a contingent capital facility, which further enhances the group’s financial flexibility. AXA Equitable Group also benefits from a diversified and productive distribution model, which includes both a large captive distribution channel, as well as extensive third-party distribution relationships.
AM Best notes that the company’s action pre-IPO to recapture its VA business from its captive reinsurer creates greater transparency on VA liabilities and associated assets. Also, AXA Equitable Group continues to maintain an appropriate ERM framework post-IPO, with a focus on hedging strategies to protect its statutory and economic capital. In anticipation of being a standalone U.S. entity, the company has updated its economic capital model to be more U.S. centric by shifting away from Solvency II framework to a U.S. economic and risk-based capital/contingent tail expectation-centric capital model.
While AXA Equitable Group intends to maintain its very strong risk-adjusted capital profile going forward, it remains exposed to equity market pressures on both sides of the balance sheet. These exposures emanate from its variable insurance products with guaranteed benefits, as well as potential volatility in revenue from asset fees as a result of market value changes in its large separate account book of business and derivative activity.
The company has recorded consistently strong operating earnings in the past several years, although with some volatility, but is well-diversified across business lines. AM Best notes that the exposure to VA guarantees is managed effectively through reinsurance and hedging programs. In recent years, AXA Equitable Group has developed and introduced new and innovative products with the objective of offering a more balanced and diversified product portfolio while reducing product risk. More recently, the company is looking to expand its product offering with solutions tailored to the employee benefits marketplace consistent with the group’s strategy of repositioning its business toward less capital-intensive products.
The FSR of B+ (Good) and the Long-Term ICR of “bbb-” have been affirmed with a stable outlook for AXA Corporate Solutions Life Reinsurance Company (Delaware).
The FSR of B++ (Good) and the Long-Term ICR of “bbb” has been affirmed with a stable outlook for AXA Equitable Life and Annuity Company (Denver, CO).
The following Long-Term IRs have been affirmed with a stable outlook:
AXA Equitable Holdings, Inc.
— “bbb+” on $1.5 billion 5% senior unsecured debentures, due 2048
— “bbb+” on $1.5 billion 4.35% senior unsecured debentures, due 2028
— “bbb+” on $800 million 3.9% senior unsecured debentures, due 2023
— “bbb+” on $350 million 7% senior unsecured debentures, due 2028 (originally issued by AXA Financial, Inc.)
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 Guide to 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 credit rating agency, news publisher and data provider specializing in the insurance industry. The company does business in more than 100 countries. Headquartered in Oldwick, NJ, AM Best has offices in cities around the world, including London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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