H Best Ratings decline AVIVA plc and its subsidiaries Rated,

 

Sunday, Mar 15,2009, 10:06:16 PM   Click:

Copyright: h Best Company, Inc.
Source: BestWire
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H Best Co. has downgraded the issuer credit rating (ICR) of "a-" from "a" of non-operating holding company, AVIVA plc (AVIVA) (United Kingdom), and rating the financial strength (FSR) of A (Excellent) from A + (Superior) and the CIHR to "A +" from "AA-" of its rated subsidiaries. H Best has also degraded the debt securities issued by AVIVA. The outlook for all of the notes is stable. (See below for a detailed list of companies and notes.)

The action follows the negative opinion of the end of the financial performance and a reduction in the risk-based capitalization, losses resulting from the investment of 2 billion pounds that the company reported its results in 2008. The losses were incurred as a result of market turbulence continues to expand equity and credit spreads on its investment portfolio.

H Best believes that if a part of the investment losses from unrealized corporate bonds that the company plans to hold to maturity, the actual level of defaults (GBP 140 million [0.2% portfolio]) and impairment (GBP 260 million) is committed significant. At the same time, the company increased provisions for the absence of further losses on the active support of its portfolio of annuities UK GBP 550 million, bringing the total available by default for this field of activity 1 , £ 1 billion, representing 8% of the portfolio's value.

Although the decision to strengthen the default and the current provision is itself in line with that of his peers AVIVA, AM Best is concerned about the level of active shareholders actuarial risks associated with global companies bond portfolio and its life support GI companies (amounting to GBP 26 billion), where the investment mix includes 30% of assets rated BBB or lower.


Hours in Best's opinion, despite the company to low default experience on its £ 12 billion portfolio of commercial mortgages in the United Kingdom, future losses are likely. This follows the deterioration of the portfolio of the Loan to Value ratio of 81% in June 2008 to 103% in December 2008, although the service coverage of interest remains strong at 1.3 times.

In line with a number of life insurers in the UK, Aviva risk-based capitalization benefit significantly from soft elements such as the value in force (VIF). Therefore, following significant reductions in the VIF in 2008, in part reflecting the adoption of actuarial value of the market consistent (MCEV) reporting, and also taking into account the effect of investment losses on the level of AVIVA unallocated divisible surplus, the overall capitalization of the company declined. AVIVA H Best also believes that the decision to maintain its dividend payments in 2008, is also on its capacity for a rapid return to the historic capital of force.

The ratings also reflect AVIVA diverse profile, which is supported by its strong market position in the UK and European life insurance market, a growing presence in the United States, and its strong multinational enterprises general insurance. AVIVA announced an increase in operating profits and new business sales growth of 11% to EUR 36 billion in 2008, partly due to currency movements, and that its market share in the life insurance market the UK has increased to 11.3% (10.5% in 2007). The company said that since 2009, it is more and more emphasis on the balance between sales volume against return.

The FSR has been downgraded to A (Excellent) from A + (Superior) and the CIHR to "A +" from "AA-" for the member companies and European entities Aviva plc:

AVIVA International Insurance Limited

Norwich Union Insurance Limited

Commercial Union Life Assurance Company Limited

CGNU Life Assurance Limited

Norwich Union Life and Pensions Ltd

Norwich Union Annuity Limited

Delta Lloyd N.V.

AVIVA Vida y Pensiones, SA de Seguros y Reaseguros

Aviva Italia Holding SpA

Mosaic

AVIVA Courtage

AVIVA Life

Société d'Epargne Life annuities

Eurofile

The rating was downgraded to "a-" from "a" to senior debt issue:

AVIVA plc --

- 9.5 million GBP 200% guaranteed bonds due 2016

The rating was downgraded to "bbb +" from "a-" to subordinated debt issues:

AVIVA plc --

- GBP 800 million 6.125% perpetual subordinated notes

- EUR 800 million 5.75% step up subordinated notes, due 2021

- GBP 700 million 6.125% fixed rate redeemable reset subordinated bonds, due 2036

- EUR 650 million 5.25% subordinated refundable, due 2023

- EUR 500 million 5.7% perpetual notes

- USD 300 million subordinated floating rate, due 2017

- GBP 400 million 6.875% callable subordinated fixed rate notes, due 2038

- 500 million euros in 6875% callable subordinated fixed rate notes, due 2018

- GBP 200 million 6.875% callable subordinated fixed rate notes, due 2038

The rating was downgraded to "BBB" from "BBB +" to the following direct capital instrument issues:

AVIVA plc --

- GBP 500 million 5.9021% direct capital instruments redeemable 2020 or thereafter

- EUR 700 million 4.7291% direct capital instruments redeemable 2014 or thereafter

The rating was downgraded to "bbb +" from "a-" to the notices on the shelves of titles:

AVIVA plc --

- Take note of senior subordinated

The rating was downgraded to "BBB" from "BBB +" to the following indicative rating on the shelves of titles:

AVIVA plc --

- Junior subordinated notes

The FSR has been downgraded to A (Excellent) from A + (Superior) and the CIHR to "A +" from "AA-" for the following life / health subsidiaries of Aviva USA Corporation:

Aviva Life and Annuity Company

American Investors Life Insurance Company, Inc.

Aviva Life and Annuity Company of New York

The ICR has been downgraded to "bbb +" from "a-" for Aviva USA Corporation.

The following debt rating has been downgraded:

Aviva USA Corporation

- A "bbb +" from "a-" on $ 143.75 million 6583% senior unsecured notes, due 2011

($ 20 million in circulation issued by the former AmerUs Group Co.)

Indianapolis Life Insurance Company --

- From "a-" from "a" on $ 25 million 8.66% surplus notes, due 2011

The main methods used in the determination of these opinions, including the methodologies and other factors, may have been taken into consideration, can be found at www.ambest.com / opinions / methodology.



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