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DCR Reaffirms Commercial Paper Rating of `D-1` for AXA-UAP SA.

LONDON, Oct. 27 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR) has reaffirmed the 'D-1' (D-One) commercial paper rating of AXA-UAP SA. The rating reflects the superior competitive positioning of the AXA-UAP Group as a global insurance and financial services company, the successful integration of the UAP Group, which is nearing completion, and the synergies that are beginning to materialise, the continuing strong capitalisation, and high financial flexibility. Balanced against these positives is a relatively high debt-to-capital ratio principally due to the merger with UAP and other restructuring efforts, the increasing demands on financial flexibility as AXA-UAP continues to implement its global initiatives, and the average performance of recent earnings. The outlook is stable.

AXA-UAP is a diversified insurance and financial services organisation with operations throughout the world. It is a publicly traded company and is a member of the CAC40 Index on the Paris Bourse, in addition to the FTSE Eurotop 100 and the Dow Jones Euro Stoxx 50, and trades on the NYSE through ADRs. In its core markets of France, UK, United States, Australia, and the Benelux region, the AXA-UAP operations are all sizeable market players in terms of market share. AXA-UAP has also recently established operations in Japan to write life and non-life insurance business. AXA-UAP is also a leader in asset management with worldwide funds of FF3,670 billion under management at June 30, 1998.

Asset quality is improving with the significant sales of French real estate achieved by AXA in 1997, where FF12 billion of real estate was sold and an additional FF5 billion of real estate is intended to be sold in each of the years, 1998 and 1999. The quality of the fixed-income portfolio is high. The recent capital markets turmoil is likely to have impacted AXA-UAP`s investment performance principally through its Australian subsidiary, National Mutual, and Donaldson, Lufkin & Jenrette Inc (a subsidiary of the Equitable Life Companies) although the extent remains unclear.

Return on equity of 11.2 percent in 1997 is below AXA-UAP`s stated target of 15 percent. DCR expects the performance of earnings to improve as the integration of UAP reaches completion and synergies are able to be fully exploited. AXA-UAP has also implemented reorganisation initiatives in certain of its operations and the benefits should begin to flow through to bottom line earnings once non-recurring charges in respect of the millennium and the Euro which are fully expensed in the first year, have been charged.

AXA-UAP assumed a significant proportion of debt when it merged with UAP in 1996. Since then, the adjusted debt-to-capital ratio at yearend 1997 has reduced to 20 percent where debt comprises both financial debt and subordinated debt. DCR expects the debt-to-capital ratio to remain in an acceptable range, which is supportive of the commercial paper rating.
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Publication:PR Newswire
Geographic Code:1USA
Date:Oct 27, 1998
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