AMSTERDAM--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Rating of “aa-” of AXA Global Re (AGRe) (France). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect AGRe’s balance sheet strength, which AM Best categorises as adequate, as well as its adequate operating performance, neutral business profile and very strong enterprise risk management (ERM). The ratings also reflect AGRe’s strategic importance to AXA S.A. (AXA), with AGRe benefiting from rating enhancement as a result.
AGRe’s balance sheet strength assessment is underpinned by its very strong risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR) as at year-end 2019, after adjustments are made for the credit risk stemming from the company’s role as AXA’s main purchaser of external reinsurance. The assessment also considers the company’s high quality capital base and its liquid and conservative investment portfolio. Offsetting factors include AGRe’s high dependence on reinsurance, which exposes AGRe to significant counterparty risk, although this is moderated somewhat by the high quality of AGRe’s reinsurance panel, as well as the expectation that AXA would promptly support AGRe in the event of a counterparty default.
AGRe’s adequate operating performance assessment is supported by a track record of stable and positive technical performance, with an average non-life combined ratio of 93% for the five-year period ending in 2019, as calculated by AM Best. Non-technical performance provides a modest but consistent contribution to the company’s results. In 2019, AGRe’s net investment return was stable at 1.3%.
AGRe’s neutral business profile assessment is supported by its key role as AXA’s captive reinsurance vehicle. While the company writes no third-party business, its role is considered integral to AXA’s risk management framework as a tool to optimise its capital resources through internal risk transfer and securing external reinsurance placements for all business segments.
AM Best assesses AGRe’s ERM as very strong, reflecting its deep integration within AXA’s ERM framework.
AGRe’s ratings benefit from its importance to AXA. AM Best’s assessment is supported by the company’s strategic role and its deep level of integration within the group’s risk management framework. Given the company’s strategic importance, AM Best expects prompt and sufficient support from the parent should the need arise.
AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
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