LONDON--(BUSINESS WIRE)--AM Best has removed from under review with developing implications and downgraded the Financial Strength Rating (FSR) to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb+” from “a-” of Axéria Prévoyance (Axéria) (France). The outlook assigned to the FSR is stable, whilst the outlook assigned to the Long-Term ICR is negative. Additionally, AM Best has removed from under review with developing implications and downgraded the FSR to B+ (Good) from A- (Excellent) and the Long-Term ICR to “bbb-” from “a-” of Axéria Re Limited (Axéria Re) (Malta). The outlook assigned to these Credit Ratings (ratings) is negative. Concurrently, AM Best has withdrawn the ratings as the companies have requested to no longer participate in AM Best’s interactive rating process.
The ratings of Axéria reflect the company’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings also factor in drag from its parent, Andromeda Investissements, which has a weaker credit profile.
The ratings of Axéria Re reflect the reinsurer’s balance sheet strength, which AM Best categorises as adequate, as well as its strong operating performance, limited business profile and appropriate ERM.
The rating actions follow the acquisition of Axéria and Axéria Re’s parent company, April S.A. (April), in June 2019 by Andromeda Investissements, which is ultimately owned by CVC Capital Partners Fund VII, and the conclusion of AM Best’s assessment of the impact of the change in ownership on the companies’ credit fundamentals.
The structuring of the acquisition, through a leveraged buyout, is expected to create significant cash flow needs for Andromeda Investissements, limiting the financial flexibility of Axéria and Axéria Re. The downgrade of Axéria Re’s ratings also consider a proposed tax reassessment notified by the French tax authorities for EUR 69.8 million concerning the territoriality of Axéria Re’s reinsurance business, which is contested by the company. AM Best expects April to support Axéria Re should the payment of the tax reassessment require it. Axéria Re’s risk-adjusted capitalisation, nonetheless, deteriorated as at year-end 2018 due to a provision of EUR 15.0 million relating to the aforementioned tax reassessment, and further deterioration is anticipated.
The negative outlooks reflect uncertainty regarding the strategic direction of the April group and the final sum that will be paid by Axéria Re in respect of the tax reassessment.
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