A.M. 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 A.M. Best categorised 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. According to A.M. Best, 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 percent for the five-year period ending in 2019, as calculated by A.M. 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 percent. 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, A.M. Best explained that 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. A.M. Best assessed AGRe’s ERM as very strong, reflecting its deep integration within AXA’s ERM framework. The rating firm suggested that AGRe’s ratings benefit from its importance to AXA.
