Axa Tumbles to Lowest Since 1995 as S&P Cuts Outlook (Update2)

By Fabio Benedetti-Valentini
Bloomberg News
February 20, 2009

Feb. 20 (Bloomberg) -- Axa SA, Europe's second-biggest insurer, fell to the lowest since 1995 in Paris trading after Standard & Poor's cut its credit outlook on the company, citing "weakened capital adequacy" and a possible drop in earnings.

Axa, whose outlook was cut to "negative" from "stable," dropped as much as 16 percent, and traded down 14 percent at 8.70 euros as of 1:01 p.m., valuing the Paris-based insurer at 18.2 billion euros ($23 billion). Axa has fallen 45 percent this year, making it the third-worst performer in the 34-member Bloomberg Europe 500 Insurance Index.

"They are struggling to convince investors that they don't need a capital increase," said Dirk Peeters, a Brussels-based analyst at KBC Securities. "Apparently the market has a different view."

The insurer had a second-half loss of 1.24 billion euros, its first in seven years, and cut its dividend as the global financial turmoil eroded the value of investments and hurt fee income. Chief Executive Officer Henri de Castries said yesterday the company faces "another challenging year" in 2009 and that it has "defense lines" for preserving capital if necessary.

Axa will ask shareholders at its April annual meeting for the authorization to sell as much as 2 billion euros of preferred shares, the company said.

Moody's Investors Service, which rates Axa's senior unsecured debt "A2," one grade lower than S&P, affirmed the insurer's ratings today with a "stable" outlook.

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