S&P negative on Allianz, Aviva and AXA ratings

Rating agency Standard & Poor’s (S&P) has affirmed the ratings of Allianz, Aviva and AXA, but given them a negative outlook.

The action follows a review prompted by the eurozone debt crisis, under which S&P place ratings of the three groups on negative credit watch. The negative credit watch status has now been removed.

S&P rates Allianz AA, and AXA and Aviva AA-.

Aviva

S&P said Aviva’s negative outlook reflects the agency’s concern that increasing economic pressures in the eurozone and across Europe, coupled with difficult financial market conditions, may weaken the insurer’s earnings capacity. This could, in turn, further constrain its financial flexibility.

The agency said it could lower the ratings over the next 12 to 24 months if the heightened risks cause earnings to deteriorate significantly relative to its expectations or if capital adequacy falls below the level it expects of an A rated insurer. S&P might also lower Aviva’s ratings if financial leverage consistently exceeds 30%.

Allianz

Allianz’s negative outlook reflects S&P’s view that the insurer’s capital adequacy has weakened to a level close to our minimum expectations for the current ratings and the risk that it could weaken further in light of economic pressures in the eurozone, coupled with challenging financial market conditions.

S&P might lower Allianz’s ratings over the next 12 to 24 months if capital adequacy deteriorates further or earnings prospects weaken to a level that S&P considers would not allow capital restoration over that period to a level at least comfortably in the A rating range.

AXA

S&P said developments in the second half of 2011 have weakened AXA’s risk-adjusted capital adequacy. The negative outlook reflects the agency’s view that the current investment market conditions and economic outlook may constrain AXA’s abilities restore capital adequacy.

S&P might lower AXA’s ratings over the next 12 to 24 months if AXA’s earnings generation and retention prospects weaken to levels that would not allow capital adequacy to improve sustainably within the A range.

However, S&P added that AXA’s revenue and earnings diversification, management actions, and risk management abilities will help strengthen capital adequacy in 2012 and 2013.