Moodys.com
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
您即将离开穆迪中国的地区网站,并会转至穆迪全球网站(英文)。应否继续?
不要再显示此讯息
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Email page
Email
print page
Print

Rating Action:

Moody’s affirms Aviva’s A2 senior debt ratings, stable outlook

27 November 2019

Aviva's UK subsidiaries' financial strength ratings affirmed at Aa3, stable outlook

London , November 27, 2019 – Moody's Investors Service has today affirmed the A2 senior unsecured debt rating of Aviva Plc ("Aviva" or "the group") and the Prime-1 short-term commercial paper rating. At the same time, Moody's also affirmed the Aa3 insurance financial strength ratings (IFSR) of Aviva's main UK operating entities, including Aviva International Insurance Limited, Aviva Insurance Limited and Aviva Life & Pensions UK Limited. The outlook on all entities remains stable.

A list of all affected ratings is available at the end of this press release.

RATINGS RATIONALE

The rating action reflects the group's (1) very strong franchise in the UK and Canadian insurance market, (2) low product risk and well-diversified business profile, and (3) solid capitalisation, with one of the lowest sensitivities to interest rate risk amongst the European composite insurers. However, Aviva's performance has been relatively weak, with bottom line profitability supported by material one-off gains over the last two years, most notably longevity releases. The group's 2018 five year average return on capital (ROC, calculated on a Moody's basis) was around 5%, comparing weakly with other similarly rated European insurers even when including one-off gains. Moody's expects underlying operating performance to improve but the magnitude will be dependent on the group's ability to reduce costs and grow revenues. Bottom line profitability on the other hand, will likely remain subdued over the coming 12-18 months.

Aviva's ratings are underpinned by the group's strong competitive position and excellent brand, particularly in the UK life and non-life markets, where the group maintains a leading position across a number of business lines. Aviva's geographic and business diversification, as well as the group's focus on retail products, contributes to a relatively low business risk profile, a key credit strength. However, Moody's notes that life insurance generated 78% of the group's adjusted operating profit (before tax, interest costs, corporate expenses and other operations) in 2018, reflecting somewhat less diversification than its largest international composite peers.

Aviva's Solvency II coverage ratios, both on a shareholder and regulatory view, have been improving in recent years. Notwithstanding the fall in interest rates during 2019, Aviva's shareholder view Solvency II coverage remained solid at 195% as at 30 September 2019, well above the upper end of the group's target range of 160% to 180%. Moody's expects Aviva's capital to show low levels of volatility thanks to the group's relatively low sensitivity to financial risks. However, the rating agency highlighted that, given the group's progressive dividend strategy, growth initiatives and deleveraging target, Aviva will need to grow underlying earnings, in order to sustain current capital levels.

Commenting on profitability, Aviva's bottom line profitability has been relatively weak, below Moody's expectations for the rating level, and is expected to remain subdued over the coming 12-18 months. The company is targeting GBP7.5 billion of operating capital generation (OCG) between 2019 and 2022. Whilst this is below the GBP9.3 billion of total operating capital generated over the last three years, Moody's notes that a significant portion (GBP4.4 billion out of GBP9.3 billion) was driven by "other capital actions," most notable unsustainably high UK longevity releases and non-recurring capital model changes. As such, the rating agency considers the group's GBP7.5 billion target for 2019-2022 to be challenging but achievable, supported by planned cost reductions and earnings growth initiatives.

Similarly, Moody's notes that Aviva's Solvency II return on equity (ROE) target of 12% is below the 12.5% ROE achieved in 2018. However, the 2018 ROE includes 3% points attributable to management actions, most notably UK longevity releases. The group's ROE for the first six months of 2019 was lower at 11%, down as a result of the absence of longevity releases as well as a reduction in long-term savings fee income, UK and French protection earnings and asset management revenues. We expect bottom line earnings to remain below the level reported in 2018 for the coming three years although the underlying earnings will be stronger if Aviva successfully executes its expense savings program and revenue growth initiatives.

With regard to its revenue growth initiatives, Aviva has highlighted the newly formed UK savings, retirement and asset management division as a key growth engine for the group. In this regard, Moody's believes that owing to the strength of Aviva's brand, its broad product offering, diverse distribution strategy and share of the UK workplace pensions market, the group is well positioned to execute its growth initiatives and capitalise on structural trends within these sectors to grow its earnings base. However, growth will be tempered by rising competition and ongoing fee pressures in these markets.

Moody's also believes that the continuation of the Canadian turnaround, a strong pipeline of opportunities in bulk purchase annuities and targeted growth in UK regional specialty and mid-market commercial lines should also support earnings growth across the group. Moreover, the planned reduction in operating expenses and interest costs, which the group expects to amount to GBP300 million and GBP100 million by 2022 respectively, will further support Aviva's underlying earnings growth.

Commenting on access to capital markets, Moody's said that Aviva has a solid and well-establish track record, and that the group's commitment to reduce its debt position by GBP 1.5 billion by 2022 will benefit its financial flexibility. The rating agency added that Aviva has GBP2.7 billion of subordinated debt redeemable by 2022, and if it meets its deleveraging target, adjusted financial leverage (calculated on a Moody's basis) would decrease by approximately 4% points from around 26%, calculated on a H1 2019 pro-forma basis, taking into account the recently GBP210 million subordinated debt redemption. Furthermore, the expected GBP100 million reduction in interest costs will also support improvements in the group's earnings coverage, which at 4.7x on a 5-year average basis, remains relatively weak for the rating level.

OUTLOOK

The outlook is stable, reflecting Moody's expectation that the group will continue to maintain a solid Solvency II ratio above 170% (on a shareholder view) and continue to reduce its leverage. Moody's also expects a successful execution of the newly presented strategic plan, with improvements in underlying profitability via its cost cutting initiatives and growing revenues in its chosen market segments.

Moody's says that in the event of a "no-deal Brexit," UK life insurers, including Aviva, would face increased risk of capital, revenue and profit deterioration, a credit negative.

WHAT COULD CHANGE THE RATINGS UP/DOWN

Whilst an upgrade is considered unlikely at this stage, Moody's says that the following factors could further improve the resilience of Aviva's ratings: (1) improvements in profitability as evidenced by a ROC consistently above 8% (calculated on a Moody's basis and adjusted for amortisation of the acquired value in-force and other intangible assets) across the underwriting cycle; (2) a sustained decrease in financial leverage to below 25% with earnings coverage consistently above 10x; and (3) further sustainable improvements in capitalisation, resulting for example in a Solvency II ratio (shareholder view) consistently above 200%.

Conversely, negative rating pressure could arise from: (1) a sustained material deterioration in Aviva's market position within its core markets, particularly within the UK life sector; (2) revenue growth and expense savings falling significantly short of the group's targets, resulting in ROC consistently below 6% (calculated on a Moody's basis and adjusted for amortisation of the acquired value in-force and other intangible assets); (3) a sustained rise in adjusted financial leverage above 30%; and/or (4) a decline in capitalisation resulting for example in a Solvency II ratio (shareholders' view) consistently below 170%.

The following ratings actions have been taken:

Issuer: Aviva Plc

..Affirmation:

....Senior Unsecured Regular Bond/Debenture: A2

....Senior Unsecured Medium-Term Note Program: (P)A2

....Subordinate Regular Bond/Debenture: A3(hyb)

....Subordinate Medium-Term Note Program: (P)A3

....Junior Subordinated Regular Bond/Debenture: A3(hyb)

....Senior Subordinate Regular Bond/Debenture: A3(hyb)

....Senior Subordinate Medium-Term Note Program: (P)A3

....Preferred Stock: Baa1(hyb)

....Commercial Paper P-1

....Backed Commercial Paper P-1

..Outlook Action:

....Outlook remains stable

Issuer: Aviva International Insurance Limited

..Affirmation:

....Insurance Financial Strength Rating: Aa3

Outlook Action:

....Outlook remains stable

Issuer: Aviva Insurance Limited

..Affirmation:

....Insurance Financial Strength Rating: Aa3

..Outlook Action:

....Outlook remains stable

Issuer: Aviva Life & Pensions UK Limited

..Affirmation:

....Insurance Financial Strength Rating: Aa3

..Outlook Action:

....Outlook remains stable

Issuer: Friends Life Limited

..Affirmation:

....Insurance Financial Strength Rating: Aa3

..Outlook Action:

....Outlook remains stable

Issuer: Friends Life Holdings plc

..Affirmation:

....Backed Senior Subordinated Regular Bond/Debenture: A2(hyb)

..Outlook Action:

....Outlook remains stable

PRINCIPAL METHODOLOGIES

The principal methodologies used in rating Aviva Plc were Life Insurers Methodology published in November 2019, and Property and Casualty Insurers Methodology published in November 2019. The principal methodology used in rating Aviva Insurance Limited and Aviva International Insurance Limited was Property and Casualty Insurers Methodology published in November 2019. The principal methodology used in rating Aviva Life & Pensions UK Limited, Friends Life Holdings plc and Friends Life Limited was Life Insurers Methodology published in November 2019. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Helena Kingsley-Tomkins
AVP-Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London
United Kingdom
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

Antonello Aquino
Associate Managing Director
Financial Institutions Group
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

Releasing Office :
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London, E14 5FA
United Kingdom
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for rating s opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

Moodys.com