A.M. Best Downgrades Ratings of Aviva Life and Annuity Company and Its
Subsidiary; Places Ratings Under Review
OLDWICK, N.J. -- December 21, 2012
A.M. Best Co. has downgraded the financial strength rating to A- (Excellent)
from A (Excellent) and issuer credit ratings (ICR) to “a-” from “a” of Aviva
Life and Annuity Company (ALAC) (West Des Moines, IA) and its wholly owned
subsidiary, Aviva Life and Annuity Company of New York (ALACNY) (Melville, NY)
(together referred to as Aviva USA). Concurrently, the ratings have been
placed under review with negative implications.
Both ALAC and ALACNY are the principal insurance subsidiaries of Aviva USA
Corporation, which is an indirect, wholly owned subsidiary of Aviva plc
(Aviva). Aviva is a global diversified financial services company based in the
The rating actions follow the Dec. 21, 2012, announcement by Aviva that it had
agreed to sell Aviva USA Corporation to Athene Holding Ltd. for $1.8 billion.
Aviva will receive sales proceeds of $1.55 billion in cash, after the
repayment of external debt. Of this, an amount of up to $250 million may be
received in the form of an interest bearing vendor loan, repayable in cash
within 12 months of completion. The transaction is expected to close in 2013,
subject to regulatory and other customary approvals.
On Oct. 31, 2012, A.M. Best had downgraded Aviva USA’s ICRs by one notch to
reflect uncertainty regarding Aviva’s future funding of growth, as Aviva had
provided significant capital contributions to Aviva USA. Given the public
announcement of sale, A.M. Best’s rating actions reflect its belief that Aviva
USA now operates on a stand-alone basis, along with the credit profile of the
potential buyer and challenges associated with establishing a new brand
The ratings for Aviva USA continue to recognize its leading market position in
indexed life insurance and fixed-indexed annuities, innovative product
development and multiple distribution networks and its favorable risk-adjusted
capitalization. Aviva USA markets a wide array of life and fixed annuity
products through multiple distribution channels, which includes brokerage
general agents, career agents, personal producing general agents and
independent marketing organizations. Aviva USA has demonstrated a
well-diversified investment portfolio and sound risk management practices.
Aviva USA results are generally positive; however, in some periods when a
reserve financing transaction occurs (e.g., December 2011), there is a surplus
strain impacting statutory net income, with a corresponding offset in surplus.
In periods when a reserve financing transaction is not in place, the redundant
reserve strain negatively impacts results. Moreover, Aviva USA’s focus on
indexed life insurance and annuities subjects its earnings to some equity
The ratings will remain under review pending discussions with the new
ownership group, a review of its business plan, investment strategy and
capitalization position post-close. A.M. Best will also monitor the ability of
Aviva USA to maintain its distribution relationships during this time of
The methodology used in determining these ratings is Best’s Credit Rating
Methodology, which provides a comprehensive explanation of A.M. Best’s rating
process and contains the different rating criteria employed in the rating
process. Best’s Credit Rating Methodology can be found at
Founded in 1899, A.M. Best Company is the world’s oldest and most
authoritative insurance rating and information source. For more information,
Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
A.M. Best Co.
Senior Financial Analyst
(908) 439-2200, ext. 5144
Assistant Vice President
(908) 439-2200, ext. 5359
Senior Manager, Public Relations
(908) 439-2200, ext. 5378
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
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