Best’s News & Research Service - June 15, 2023 10:32 AM (EDT)
AM Best Withdraws Credit Ratings of Aviva plc and Its Subsidiaries
- June 15, 2023 10:32 AM (EDT)
London //BestWire// - AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” (Superior) of the rated insurance subsidiaries of Aviva plc (Aviva) (United Kingdom). AM Best also has affirmed the Long-Term ICR of “a” (Excellent) of Aviva, the group’s non-operating holding company. At the same time, AM Best has affirmed all Long-Term Issue Credit Ratings (Long-Term IRs) on rated debt instruments issued or guaranteed by Aviva. The outlook of these Credit Ratings (ratings) is stable. (See below for a complete listing of ratings). Concurrently, AM Best has withdrawn the ratings as the company has requested to no longer participate in AM Best’s interactive rating process.
The ratings reflect Aviva’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, favourable business profile and appropriate enterprise risk management.
Aviva’s balance sheet strength is underpinned by its consolidated risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best’s assessment of the group’s risk-adjusted capitalisation includes contribution from economic capital embedded in long-term business and equity credit for hybrid debt. In recent years, the group has observed a significant reduction in the sensitivity of its balance sheet to interest rate risk and has taken actions to reduce its debt burden. As at March 2023, Aviva reported a healthy estimated Solvency II coverage ratio of 196% (year-end 2022: 212%). The group’s asset-liability and liquidity management also are supportive of the balance sheet strength assessment.
Aviva has reported strong operating performance in recent years, with a five-year weighted average return on equity (2018-2022) of 8.8% (as calculated by AM Best), benefiting from a well-diversified portfolio by product across life and non-life segments. Profitability has been supported by strong growth across protection, annuity and savings products, combined with improving new business margins. Aviva’s reported new business margin in 2022 was 2.3% (2021: 1.9%), while its non-life combined ratio was 92.7% (2021: 93.9%) (as calculated by AM Best), despite challenging macroeconomic conditions and inflationary pressures.
Aviva’s business is focused on its core markets of the UK, Ireland and Canada, where it maintains leading positions in several lines of business. The group’s business profile is well-diversified by product, both in life and non-life insurance, and by distribution channel.
The FSR of A+ (Superior) and the Long-Term ICRs of “aa-” (Superior) have been affirmed with stable outlooks. Concurrently, AM Best has withdrawn the ratings at the company’s request for the following subsidiaries of Aviva plc:
- Aviva Insurance Limited
- Aviva International Insurance Limited
The following subordinated Long-Term IRs have been affirmed. Concurrently, AM Best has withdrawn the Long-Term IRs at the company’s request:
— “a-” (Excellent) on GBP 700 million 6.125% callable fixed rate reset subordinated bonds, due 2036
— “a-” (Excellent) on GBP 600 million 6.875% callable fixed rate subordinated notes, due 2058
The following indicative Long-Term IRs have been affirmed. Concurrently, AM best has withdrawn the shelf registration at the company’s request:
— “a-” (Excellent) on senior subordinated notes
— “bbb+” (Good) on junior subordinated notes
This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.