Best Places Aviva’s U.S. Subsidiaries Ratings under Review/Negative

December 16, 2011

Following its rating actions on the UK-based Aviva plc, A.M. Best Co. has placed under review with negative implications the financial strength rating (FSR) of ‘A ‘(Excellent) and issuer credit ratings (ICR) of “a+” of Iowa-based Aviva Life and Annuity Company (ALAC) and its wholly owned subsidiary, Aviva Life and Annuity Company of New York (ALACNY), together known as Aviva USA.

Best explained that these “companies are the principal insurance subsidiaries of Aviva USA Corporation, which is an indirect, wholly owned subsidiary of Aviva plc, a global diversified financial services company based in the United Kingdom.”

These rating actions follow Best’s recent review of Aviva, which resulted in its ratings being placed under review with negative implications on December 15, 2011. The rating actions on Aviva were driven by the company’s exposure to investments in several peripheral euro zone economies, Italy in particular.

Best said its rating actions on Aviva and other European (re)insurers “reflect their exposure to the continued deterioration of the sovereign creditworthiness of several euro zone countries and the negative economic outlook for the region. Aviva USA’s ratings are inherently tied to those of Aviva and reflect enhancement in consideration of Aviva’s overall credit profile.

“Aviva USA’s ratings reflect its leading market positions in indexed life insurance and annuities, diversified distribution channels, well diversified investment portfolio, sound risk management practices and adequate risk-adjusted capitalization. The ratings also recognize the strategic and financial benefits derived from Aviva.”

As partial offsetting factors Best cited the U.S. Company’s “fluctuating statutory operating performance, its heavy liability and new business concentration in indexed products and its modest exposure to equity market risk.

However, Best also pointed out that the “company’s statutory net income has been positive in 2010 and 2011.”

In addition Best noted that it has withdrawn the ICR of “bbb+” for Aviva USA Corporation due to the maturity of its remaining senior debt that was assumed with the acquisition of AmerUs Group Co.

Source: A.M. Best

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