AXIS Capital outlook revised to negative post Novae acquisition

S&P Global Ratings has revised the outlook for Bermuda-based AXIS Capital Holdings to negative from stable, reflecting its concerns that AXIS' capital redundancy will significantly diminish after the deal acquisition of Novae Group.

AXIS Capital is to acquire Lloyd's insurer Novae Group for £468 million ($604 million) in an all-cash deal.

"We believe the existing capital redundancies will shrink significantly as AXIS integrates Novae during the next couple of years," S&P commented in a July 6 statement. "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 re/insurance segments."

The negative outlook on AXIS means that S&P could lower the ratings within the next 24 months. The ratings agency would lower its ratings by one notch if AXIS cannot successfully integrate Novae because of potential cultural challenges, earnings volatility, and difficulty rebuilding its capital adequacy at the 'AAA' level.

S&P has also said that it affirmed its 'A-' long-term counterparty credit and senior debt ratings on AXIS, and its 'A+' long-term counterparty credit and financial strength ratings on AXIS' core operating subsidiaries.

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