A.M. Best Affirms Ratings of AVIVA plc and Its Subsidiaries
LONDON -- October 16, 2013
A.M. Best Europe – Rating Services Limited has affirmed the financial strength
rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a+” of the
insurance subsidiaries of AVIVA plc (AVIVA) (United Kingdom). Additionally,
A.M. Best has affirmed the ICR of “a-” of AVIVA and the ICRs of all debt
securities. The outlook for the FSR remains stable and the outlook for the
ICRs remains negative. (Please see link below for a detailed listing of the
companies and ratings.)
Concurrently, A.M. Best has affirmed all ratings of Aviva Insurance Company of
Canada and its affiliates.
The main rating drivers for the negative outlook on AVIVA’s ICR are the high
debt leverage, the volatility of financial results and the significant senior
managerial changes in this transitional period for the group. The main drivers
for the rating affirmations are AVIVA’s strong risk-adjusted capitalization,
improving financial performance and more focused business profile.
According to A.M. Best’s model, AVIVA’s risk based capital has improved
significantly both at year-end 2012 and half-year 2013 due to
better-performing financial markets, as well as a material decline in
intangibles and deferred acquisition costs (DAC). The reduction of intangibles
and DAC is primarily linked to AVIVA’s sale of the US life business in early
October 2013. Risk-adjusted capitalisation is supported by various components
such as the credit default provision, the fund for future appropriations, the
value in-force (an embedded value measure) and hybrid borrowings. Any
significant fluctuation of these elements could weaken AVIVA’s capital
position. However, A.M. Best expects capitalization to remain supportive of
the ratings. Although financial leverage remains high for the rating level,
management is committed to reduce it in the medium term.
AVIVA posted a profit before tax of GBP 1.1 billion as at June 2013, after a
loss of GBP 3 billion at year-end 2012 due to the accounting treatment of the
sale of its US business. Results have the potential to remain volatile while
AVIVA transitions into a leaner and more focused insurer.
Positive rating movements are unlikely unless there is a clear reduction in
financial leverage and stabilization in the improved capital position.
Negative rating actions could occur if AVIVA’s financial leverage were not to
improve, risk-adjusted capitalization were to deteriorate significantly or
financial performance was consistently negative in the coming years.
For a complete listing of AVIVA plc and its subsidiaries’ FSRs, ICRs and debt
ratings, please visit www.ambest.com/press/101602avivaplc.pdf.
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
In accordance with Regulation (EC) No. 1060/2009, the following is a link to
required disclosures: A.M. Best Europe - Rating Services Limited Supplementary
A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best
Company. A.M. Best Company is the world's oldest and most authoritative
insurance rating and information source. For more information, visit
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
A.M. Best Co.
Anandi Nangy-Kotecha, +(44) 20 7397 0271
Associate Director, Analytics
Carlos Wong-Fupuy, +(44) 20 7397 0287
Senior Director, Analytics
Rachelle Morrow, +(1) 908-439-2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, +(1) 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
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