Positive Outlook for AXA Group
S&P Global Ratings, a provider of credit ratings, research, and risk analysis, has revised its outlook on AXA Group, an insurance and asset management company based in France, from stable to positive. This change reflects the carrier’s anticipated profitability growth and capital-light strategy. Additionally, S&P affirmed its ‘AA-‘ long-term insurer financial strength and issuer credit ratings for AXA’s core operating subsidiaries, while withdrawing the ‘AA-‘ financial strength rating on AXA Insurance Co. at the insurer’s request.
The credit ratings agency also maintained its ‘A+’ long-term insurer financial strength and issuer credit ratings on AXA’s operating holding company and all other highly strategic subsidiaries. Furthermore, S&P confirmed its ratings on AXA Group’s outstanding debt.
AXA’s Strategic Moves and Financial Performance
This positive outlook stems from AXA’s expected continued growth in profitability between 2024 and 2026, as well as its strategic capital-light approach. AXA’s efforts to meet its full-year 2024 target of 6%-8% growth in underlying earnings per share, despite challenges such as natural catastrophes, were also viewed favourably by S&P. The ratings agency highlighted AXA’s focus on expanding its business lines with lower capital requirements, such as property/casualty (P/C), health insurance, and life protection portfolios.
S&P also noted that AXA’s recent sale of AXA Investment Managers and AXA Select to BNP Paribas for €5.4 billion would modestly improve the group’s capital adequacy, with the proceeds funding a share buyback and supporting core insurance operations. S&P Global Ratings further emphasised AXA’s resilient profit-generating capacity, which is supported by the group’s extensive geographic and business diversification. In 2023, the group’s P/C, life, and health sectors accounted for 61%, 30%, and 9%, respectively, of its pre-tax profit.
AXA’s strong positions in countries such as France, Switzerland, and the UK, as well as its leadership in large corporate commercial lines through AXA XL, were noted as key strengths. While AXA’s performance in 2023 showed some underperformance in Germany and the UK, S&P expects recovery in these markets in 2024 and beyond. The company has also reduced its exposure to natural catastrophes and bolstered its reinsurance programs to safeguard profitability.
In its base case scenario, S&P projects AXA will achieve top-line growth of 5%-6% and maintain a combined ratio between 90% and 95%. The insurer’s net income is expected to rise to over €8 billion by 2026, up from €7.4 billion in 2023.
S&P also expressed confidence in AXA’s ability to weather potential negative impacts from a sovereign stress event in France, citing the group’s limited exposure to French assets. The rating agency added that AXA’s large balance sheet and strong solvency ratio, which stood at 221% as of September 30, 2024, provide a solid buffer against market volatility.
However, S&P highlighted that it remains cautious about AXA’s ability to consistently maintain its capital adequacy above the 99.95% threshold, a key factor in assessing the group’s financial risk profile. Looking ahead, S&P indicated that it could lower the ratings if adverse market developments lead to prolonged reductions in AXA’s capital adequacy or if a weakening of its operating performance combined with a high dividend payout harms internal capital generation.
On the other hand, the ratings could be raised if AXA delivers on its profitability forecasts and strengthens its capital buffers beyond the 99.95% capital level. In summary, S&P Global Ratings sees positive momentum for AXA Group in the coming years, with expectations of continued profitability growth and a solid financial position relative to its peers. The group’s ability to manage risks, adapt to market conditions, and maintain robust capital adequacy will be key to sustaining its positive outlook.
