LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” of the rated insurance subsidiaries of Aviva plc (Aviva) (United Kingdom). Additionally, A.M. Best has affirmed the Long-Term ICR of “a-” and the Long-Term Issue Credit Ratings (Long-Term IR) of Aviva. The outlook for each of these Credit Ratings (ratings) is stable. Please see below for a detailed listing of the companies and ratings.
The ratings of Aviva and its subsidiaries reflect the group’s strong risk-adjusted capitalisation, stable financial performance, expected strong cash flow and very strong business profile in its core markets. A.M. Best’s calculation of risk-adjusted capitalisation for the combined group includes a significant capital contribution from unallocated divisible surplus, which mostly relates to participating funds in France and the United Kingdom, value in the group’s life segment that is not reflected in the IFRS reporting (for which Solvency II disclosures have been used) and hybrid borrowings. Although the first two of these elements can be volatile and subject to fungibility constraints, A.M. Best expects risk-adjusted capitalisation to continue being supportive of the ratings.
Financial leverage, as calculated by A.M. Best, remains high for the rating level. Most of Aviva’s capital is located in the group’s life subsidiaries. An internal loan from the main non-life subsidiary to a fellow group subsidiary, which is not part of the financial leverage calculation, in part reflects these fungibility constraints. The ratings and outlooks incorporate A.M. Best’s expectation of rising cash flow, which would mitigate fungibility constraints. Capital requirements are expected to be reduced over the medium term by the limited capital required to support Aviva’s new life business when compared to the higher but declining requirement for the existing back book. In the nearer term, liquidity held centrally by the group is likely to continue to increase as cash flow from corporate activity and other management actions supplement cash flow from operations to more than accommodate the group’s external dividend and coupon payments in 2017.
The FSR of A (Excellent) and the Long-Term ICRs of “a+” have been affirmed for the following subsidiaries of Aviva plc. The outlook for each of these ratings remains stable.
- Aviva Insurance Limited
- Aviva International Insurance Limited
- Aviva Insurance Company of Canada
- Elite Insurance Company
- Traders General Insurance Company
- Pilot Insurance Company
- Scottish & York Insurance Company, Limited
- S&Y Insurance Company
The following subordinated Long-Term IRs have been affirmed with a stable outlook:
-- “bbb+” on GBP 450 million 6.625% callable subordinated notes, due 2041
-- “bbb+” on GBP 800 million 6.125% perpetual subordinated notes
-- “bbb+” on GBP 700 million 6.125% callable fixed rate reset subordinated bonds, due 2036
-- “bbb+” on GBP 600 million 6.875% callable fixed rate subordinated notes, due 2058
-- “bbb+” on EUR 500 million 6.875% callable fixed rate subordinated notes, due 2038
-- “bbb+” on USD 400 million 8.25% callable subordinated notes, due 2041
The following direct capital instrument Long-Term IRs have been affirmed with a stable outlook:
-- “bbb” on GBP 500 million 5.9021% direct capital instruments redeemable 2020 or thereafter
-- “bbb” on USD 650 million 8.25% direct capital instruments redeemable 2017 or thereafter
The following indicative Long-Term IRs on shelf securities have been affirmed with a stable outlook:
-- “bbb+” on senior subordinated notes
-- “bbb” on junior subordinated notes
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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