Moody’s Investors Service has upgraded a number of
Aviva Plc’s ratings, including the insurance financial strength ratings (IFSR) of its UK operations.
Not only has the firm’s senior unsecured debt rating been upgraded from A3 to A2, the IFSRs of Aviva International Insurance Limited, Aviva Insurance Limited, and Aviva Life & Pensions UK Limited have all been upgraded to Aa3 from A1. Among the other upgrades is the advancement of Aviva Plc’s commercial paper rating from P-2 to P-1.
“The upgrade of Aviva Plc’s ratings with a stable outlook reflects the recent improvements in the group’s profitability, capital and financial flexibility, and Moody’s expectations that these improvements are sustainable,” said the rating agency. “In particular, Moody’s expects the volatility of Aviva’s results to be low, given the substantial de-risking and business re-focusing that the group initiated in 2013.”
It continued: “The stable outlook reflects Moody’s expectation that low interest rates and Brexit will only have a moderate negative impact on Aviva’s credit profile over the next 12-18 months. The Aa3 IFSRs of Aviva’s UK operations are also underpinned by the group’s sustained market-leading positions in the UK life and P&C (property and casualty) markets.”
The insurance giant, for its part, said it has significantly improved its capital position’s strength and resilience, focusing on markets where it has the strongest franchises and sustainable earnings and cash-flow. Moody’s itself has noted the company’s continued growth in operating profits in the last four years.
“Moody’s expects Aviva to further improve or at least sustain its current level of profitability,” added the rating agency. “In part, this is due to new distribution agreements, such as the one signed with HSBC Bank plc in the UK in August 2017, and by expected continued growth in asset management.”
Welcoming the development, Aviva Plc chief financial officer Tom Stoddard said: “This upgrade by Moody’s to Aa3 is an important milestone for Aviva. It recognises the significant progress in recent years to strengthen Aviva’s balance sheet, which resulted in an increase to our Solvency II capital surplus to £11.4 billion at June 30, 2017.”
Stoddard added: “We remain focused on extending our track record of growth in operating EPS (earnings per share) and the significant levels of surplus cash building at group centre provide scope for us to continue to reduce debt and invest in growing our businesses.”
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