S&P changes outlook for Axis ratings after acquisition announcement
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Standard & Poor’s Financial Services L.L.C. slapped a “negative” outlook on Axis Capital Holdings Ltd. on Thursday following the insurer and reinsurer’s announcement earlier this week that it will buy rival Novae Group P.L.C.
The New York-based rating agency’s move means it may downgrade Bermuda-based Axis’ A+ financial strength rating and other ratings within the next 24 months. Previously, S&P had a “stable” outlook for Axis.
The move comes a day after Axis announced that it will buy London-based Novae for about $604 million in cash.
In a statement, S&P said the move will leave Axis with less capital to support its ongoing business, which it is conducting in a competitive market.
“We believe the existing capital redundancies will shrink significantly as Axis integrates Novae during the next couple of years. In addition, the change in outlook reflects the potential stress on the new consolidated group’s business profile, given the expected growth in the London market and the potential volatility in earnings in light of the headwinds in the company’s key (insurance and reinsurance) segments,” S&P said.
An Axis spokesman said in an email: “We believe that this transaction has significant strategic merits for Axis, strengthening our competitive positioning in the international specialty insurance market while enhancing the financial and robust credit profile of the combined company going forward. We believe that Axis will deliver increased, more diversified profitability and an enhanced financial position and liquidity profile that will continue to support our strong ratings.”
On Thursday, rival rating agency A.M. Best Co. Inc. announced that it was maintaining its “stable” outlook for Axis.
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