A.M. Best has upgraded the financial strength rating to B+ (Good) from B (Fair) and the issuer credit rating to “bbb-” from “bb+” of AXA Mansard Insurance Plc (AXA Mansard) (Nigeria), the majority-owned subsidiary of AXA S.A. (AXA). The ratings have been removed from under review with developing implications and assigned a positive outlook.
The upgrade of AXA Mansard’s ratings reflects the company’s strategic importance to AXA, through its access to the largest economy in Africa, where the company benefits from a strong competitive position, particularly within the market’s retail segment. Additionally, A.M. Best expects AXA Mansard to benefit from the alignment of its risk management capabilities to that of its majority shareholder, allowing the company to share in the expertise and utilise the risk mitigating practices of the group.
The positive outlook reflects AXA Mansard’s consistently excellent underwriting performance, as demonstrated by the five-year average non-life combined ratio of 83%. Technical results have been maintained despite the company’s rapid growth in recent years and the impact of the increasingly competitive conditions on pricing. A.M. Best expects AXA Mansard’s underwriting earnings to remain strong, supported by its solid competitive position as a top five composite insurer in Nigeria, the benefit of its wide and expanding distribution network, as well as its effective risk management. However, some downside risk remains due to the weakening economic conditions of its domestic market and its impact on the operating environment. A.M. Best will continue to monitor the impact of Nigeria’s diminishing economic activity on AXA Mansard’s rating fundamentals.
A.M. Best expects AXA Mansard’s risk-adjusted capitalisation to remain at a solid level, sustained by high retained earnings and benefiting from the de-risking of its investment portfolio. In past years, AXA Mansard’s risk-adjusted capitalisation has been constrained by the relatively high level investments in unlisted equities and property. However, the company has made a concerted effort to reduce its exposure through its divestment of both asset classes. Based on unaudited accounts for the first half of 2015, AXA Mansard’s exposure to unlisted equities and property has stabilised to approximately 60% of the company’s capital and surplus base, compared with the highs of 83% in 2012.