Fitch downgrades Axa

Market conditions and poor results put Axa on negative

Fitch Ratings has today downgraded all AXxa entities' Insurer Financial Strength (IFS) ratings to 'AA-' (AA minus) from 'AA'. Fitch has also downgraded Axa SA's Long-term Issuer Default Rating (IDR) to 'A' from 'AA-' (AA minus) and Short-term IDR to 'F1' from 'F1+'.

The downgrade reflects Fitch's view of the group's lower capital adequacy and reduced profitability caused by the extreme stress in financial markets over the past months. All Long-term IDR and IFS ratings have a negative outlook.

Fitch said: “As measured by both regulatory calculation and Fitch internal analysis, capital adequacy has materially reduced from the high levels seen at end-2007 but is expected to show some resilience against further deterioration in financial markets. Fitch notes that management is considering contingency measures in the event of further market deterioration, such as reducing capital needs or protecting available resources. Axa's profitability has also suffered in 2008 with underlying earning down 17% from 2007 due to the unfavourable trend in financial markets which has generated a number of non-recurring negative results, especially on the life business, although non-life activities continued to perform well. Fitch expects profitability to remain under pressure in the foreseeable future although volatility should be limited by various actions taken to materially reduce the group's overall risk profile.

“The negative outlook reflects Fitch's view that difficult conditions in global financial markets are likely to continue, which could make it challenging for AXA to come back to its previous level of profitability and solvency. Rating Outlook indicates the direction ratings are likely to move over the next one to two years.”

But it said: “Axa group's ratings continue to reflect Fitch's view of the group's position as one of the world's largest providers of insurance and financial services, benefiting from excellent risk management and geographic diversification, key competitive advantages in products and distribution capabilities, quality of its management team and consistent strategy.

The two-notch downgrade of the holding company's Long-term IDR reflects the general weakened financial profile of the group and declining fixed-charge coverage at the holding company level. This has occurred as a result of lower profitability while financial leverage remained relatively stable. This action results in more typical notching between the rating of the group's operating companies and that of the holding company.

The ratings of Axa's US operations reflect Fitch's view that Axa Financial and its subsidiaries are core operations of Axa and continue to benefit from support from the parent. Fitch notes, however, that the U.S. operations were a drag on the group's overall results in 2008, with capital levels and earnings performance significantly affected by the severe downturn in the equity markets. To offset this exceptional impact, particularly in the variable annuity segment, Axa SA contributed $3bn of capital to the US operations.

Rating actions on AXA entities:

AXA

Long-term IDR downgraded to 'A' from 'AA-' (AA minus); Negative Outlook
Senior unsecured debt downgraded to 'A-' (A minus) from 'A+'
Subordinated debt downgraded to 'BBB+' from 'A'
Junior subordinated debt downgraded to 'BBB+' from 'A'.
Short term IDR downgraded to 'F1' from 'F1+'
Commercial paper downgraded to 'F1' from 'F1+'

AXA Financial, Inc.

Long-term IDR downgraded to 'A' from 'AA-' (AA minus); Negative Outlook
Senior unsecured debt downgraded to 'A-' (A minus) from 'A+'

AXA Equitable Life Insurance Company

Long-term IFS rating downgraded to 'AA-' (AA minus) from 'AA'; Negative Outlook
Long-term IDR downgraded to 'A+' from 'AA-' (AA minus); Negative Outlook
Surplus notes downgraded to 'A' from 'A+'

MONY Life Insurance Company

Long-term IFS rating downgraded to 'AA-' (AA minus) from 'AA'; Negative Outlook
Long-term IDR downgraded to 'A+' from 'AA-' (AA minus); Negative Outlook
Surplus notes downgraded to 'A' from 'A+'

AXA Versicherung (Switzerland) AG (formerly Winterthur Swiss Insurance Company)

Long-term IFS rating downgraded to 'AA-' (AA minus) from 'AA'; Negative Outlook
Long-term IDR downgraded to 'A+' from 'AA-' (AA minus); Negative Outlook

DBV-Winterthur Holding AG

Long-term IDR downgraded to 'A' from 'AA-' (AA minus); Negative Outlook

The following AXA subsidiary companies' Long-term IFS ratings have been downgraded to 'AA-' (AA minus) from 'AA'; all the companies have a Negative Outlook: