AM Best Upgrades Credit Ratings of Aviva plc and Its Subsidiaries

AM Best has upgraded the Financial Strength Rating (FSR) to A+ (Superior) from A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “aa-” (Superior) from “a+” (Excellent) of the rated insurance subsidiaries of Aviva plc (United Kingdom). Concurrently, AM Best has upgraded the Long-Term ICR to “a” (Excellent) from “a-” (Excellent) of Aviva plc (Aviva), the group’s non-operating holding company. At the same time, AM Best has upgraded all Long-Term Issue Credit Ratings (Long-Term IRs) on debt instruments issued or guaranteed by Aviva. The outlook of these Credit Ratings (ratings) has been revised to stable from positive. (See below for a complete listing of ratings).

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.

The rating upgrades reflect the strengthening of Aviva’s balance sheet position. In particular, AM Best notes the significant reduction in the group’s balance sheet sensitivity to interest rate risk following the successful disposal of several non-core life insurance subsidiaries over 2021. In addition, Aviva has reduced its financial leverage in recent years in line with its strategic objectives. The group’s risk-adjusted capitalisation (RAC), as measured by Best’s Capital Adequacy Ratio (BCAR), remained at the strongest level at year-end 2021 and was bolstered by the effect of the disposals, which resulted in lower asset risk requirements. While Aviva’s RAC may diminish from its 2021 level, it is expected to be maintained well above the minimum requirements for the strongest assessment. AM Best’s assessment of RAC for the group includes contribution from economic capital embedded in long-term business and equity credit for hybrid debt. However, the group’s reliance on these softer capital elements is largely in line with its peers.

Aviva has reported strong operating performance in recent years with a five-year weighted average return on equity (2017-2021) of 11.4% (as calculated by AM Best), benefiting from a well-diversified portfolio by product across the life and non-life segments. The group is taking actions to withstand the impact of inflationary pressures and more difficult macroeconomic conditions; for example, through pricing actions, robust asset-liability management, leveraging on its own motor repair network and optimising its cost base. AM Best will continue to monitor how the group responds to external operational challenges.

Following the disposal of several international subsidiaries, Aviva’s business is now focused on its core markets of the United Kingdom, Ireland and Canada. AM Best notes the group’s considerable scale and strong competitive position in these markets and therefore considers Aviva to be well-positioned to continue to grow in these markets.

The FSR has been upgraded to A+ (Superior) from A (Excellent) and the Long-Term ICR to “aa-” (Superior) from “a+” (Excellent) with the outlooks revised to stable from positive on the following subsidiaries of Aviva plc:

• Aviva Insurance Limited
• Aviva International Insurance Limited

The following subordinated Long-Term IRs have been upgraded, with the outlooks revised to stable from positive:

Aviva plc—

— to “a-” (Excellent) from “bbb+” (Good) on GBP 800 million 6.125% perpetual subordinated notes

— to “a-“ (Excellent) from “bbb+” (Good) on GBP 700 million 6.125% callable fixed rate reset subordinated bonds, due 2036

— to “a-” (Excellent) from “bbb+” (Good) on GBP 600 million 6.875% callable fixed rate subordinated notes, due 2058

The following indicative Long-Term IRs have been upgraded with the outlooks revised to stable from positive for the shelf registration:

Aviva plc—

— to “a-” (Excellent) from “bbb+” (Good) on senior subordinated notes

— to “bbb+” (Good) from “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. For more information, visit www.ambest.com.

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