AXAs decision to pull out of the U.S. life and non-life reinsurance market and refocus its reinsurance business prompted downgrades from the major rating agencies.
AXA Re Finance, a unit of AXA Group, Paris, announced the reorganization, which included cessation of U.S. financial guaranty reinsurance activities carried by AXA Re Finance and cessation of underwriting and renewing contracts on life and non-life reinsurance businesses through its U.S. subsidiaries, AXA Corporate Solutions Reinsurance Company and AXA Corporate Solutions Life Reinsurance Company.
Existing business will be put in runoff, AXA says.
The company says it will remain active in the U.S market through AXA Re Finance and will focus on property-catastrophe non-life reinsurance, including marine and aviation insurance.
Citing tight profit margins for the affected reinsurance lines of business, AXA spokeswoman Clara Rodrigo, says the moves will make it possible to efficiently optimize returns and concentrate on profitable businesses.
Business margins in reinsurance are tighter and consequently, it is necessary to have “better control of the business” and assess underwriting risk, she says.
Although property-casualty reinsurance can be a volatile market, Rodrigo says AXA Re has “good processes in place to assess risk.”
Gross written premiums on the reorganized businesses in 2001 and the first half of 2002 are, respectively:
E533 million and E307 million for AXA Corporate Solutions Reinsurance Co.;
E134 million and E81 million for AXA Corporate Solutions Life Reinsurance Co.; and,
E74 million and E47 million for the financial guaranty activities in the U.S. of AXA Re Finance.
Fitch Ratings, New York, downgraded the insurer financial strength rating of AXA Re Finance to AA from AAA and placed the unit on Rating Watch Negative. The action, Fitch says, “reflects AXA Re Finances status as a company in runoff.” As such, according to Fitch, it has less incentive to maintain its capital at current levels.
The AA insurer financial strength ratings of AXA Corporate Solutions Re (US) and AXA Corporate Solutions Life Re (US) were affirmed and withdrawn by Fitch at the request of the companies.