OREANDA-NEWS. Fitch Ratings has affirmed AXA entities' Insurer Financial Strength (IFS) ratings at 'AA-'. Fitch has also affirmed AXA SA's Long-term Issuer Default Rating (IDR) at 'A' and Short-term IDR at 'F1'. The Outlooks on the Long-term IDR and IFS ratings are Stable. A full list of rating actions is available at the end of this commentary.

The affirmation reflects the AXA group's strong consolidated group capital position, its broad diversification by geography and business lines, and solid business position in its key markets.
Capitalisation is considered "very strong" under Fitch's Prism factor-based capital model (FBM) based on end-2014 data, supporting the ratings. The group's strong core capitalisation remained comfortable at end-1H15 with shareholders' funds of EUR66.9bn (end-2014: EUR65.2bn) and the economic solvency ratio up at 215% (end-2014: 201%).

The ratings also benefit from the group's improved financial leverage and strong fixed charge coverage. According to Fitch's calculations, financial leverage improved to 25% at end-2014 from 28% at end-2013. In addition, fixed charge coverage as calculated by Fitch has been consistently above 9x over the past five years, which we expect to be maintained, in line with the ratings.

Partially offsetting these positive rating factors are the high level of intangibles AXA has on its balance sheet. At end-2014, AXA had EUR16bn (2013: EUR14.8bn) of goodwill on its consolidated balance sheet, mostly relating to insurance and asset management operations acquired in the US, Switzerland and Japan. Despite a strong increase in shareholder's equity in 2014, goodwill still represented a fairly high proportion of shareholder's equity at 23% (2013: 27%).

Over the past five years, AXA group's operating profitability has recovered as reflected by a steady rise in underlying earnings to EUR5.1bn at end-2014 from EUR3.9bn at end-2010. Return on equity increased to 9.6% in 2014 (2013: 8.1%). In 1H15, underlying earnings reached EUR3.1bn, up 12% from the same period in 2014. While the increase was to a large extent driven by favourable exchange rate movements, underlying earnings were also up 2% on constant exchange rates. Net income was up 2% at EUR3.1bn, also supported by favourable exchange rate movements.

Fitch expects further improvement in profitability to be a challenge for the AXA group, mostly due to a persistent low interest rate environment. However, management continues to take actions to increase tariffs, adjust the group's business and geographical mix and exercise strong asset-liability management discipline. .

The AXA group's US operations' ratings reflect Fitch's view that AXA Financial Inc. (AXF) and its subsidiaries remain core operations.

Factors that could lead to a downgrade of AXA include a sustained deterioration in AXA's Prism FBM score to "Strong", or a decline in the return on adjusted equity to below 8%. In addition, the ratings could be downgraded if financial leverage increases above 30%.

Factors that could lead to an upgrade of AXA include a sustained improvement in profitability with a return on adjusted equity above 12%, with the Prism FBM score remaining at least at the "very strong" level and the financial leverage ratio no higher than the current level of 25%.


Long-term IDR affirmed at 'A'; Outlook Stable
Short-term IDR affirmed at 'F1'
Subordinated debt affirmed at 'BBB'
Junior subordinated debt affirmed at 'BBB'
US-registered subordinated debt debentures affirmed at 'BBB+'
Commercial paper affirmed at 'F1'

AXA Financial, Inc.
Long-term IDR affirmed at 'A'; Outlook Stable
Senior unsecured debt affirmed at 'A-'
Commercial paper affirmed at 'F1'

AXA Equitable Life Insurance Company
Long-term IFS rating affirmed at 'AA-'; Outlook Stable
Long-term IDR affirmed at 'A+'; Outlook Stable
Surplus notes affirmed at 'A'

AXA Versicherungen (Switzerland) AG
Long-term IFS rating affirmed at 'AA-'; Outlook Stable
Long-term IDR affirmed at 'A+'; Outlook Stable

AXA Global P&C
Long-term IFS rating affirmed at 'A+'; Outlook Stable

These rating actions do not have any impact on the ratings of AXA Bank Europe SCF's covered bonds.

The following AXA subsidiary companies' Long-term IFS ratings have been affirmed at 'AA-' with Stable Outlook:

AXA France Vie
AXA Corporate Solutions Assurance
AXA Insurance Company (US)
AXA Leben (Switzerland) AG
AXA Belgium
AXA Versicherung (Germany) AG
AXA Lebensversicherung (Germany) AG
AXA Krankenversicherung AG
DBV Deutsche Beamtenversicherung AG
Deutsche Arzteversicherung AG
AXA Insurance UK Plc
AXA PPP Healthcare Ltd
AXA Insurance Singapore Pte Ltd
AXA General Insurance Hong Kong Ltd
AXA China Region Insurance Co. (Bermuda) Ltd
AXA Equitable Life and Annuity Company
MONY Life Insurance Company of America
U.S. Financial Life Insurance Company