AM Best has affirmed the financial strength rating of A+ (Superior) and the long-term issuer credit rating of “aa-” (Superior) of XL Bermuda Ltd (Axa XL) and its subsidiaries.

The outlook of these credit ratings is stable.

The ratings reflect Axa XL’s balance sheet strength, which AM Best assesses as adequate, its adequate operating performance, favourable business profile and very strong enterprise risk management, as well as the benefit of significant implicit and explicit support provided by its ultimate parent, Axa SA.

Axa XL’s overall balance sheet strength assessment of adequate recognises recent deterioration in its capital levels, as measured by Best’s capital adequacy ratio, largely stemming from unrealised losses in Axa XL’s investment portfolio.

AM Best notes that Axa XL nevertheless benefits from significant financial flexibility provided by Axa SA, and that on a stand-alone basis, Axa XL continues to maintain ample liquidity and a solid regulatory capital position.

Operating performance has steadily improved following elevated Covid losses experienced in 2020. The group’s underwriting performance has benefited from an improving rate environment and prudent risk selection. Axa XL has also reduced its exposure to natural catastrophe risk in recent years, which has lowered underwriting volatility and should lead to stable performance going forward.