Fitch Ratings has affirmed
The Outlooks are Stable.
The affirmation reflects Aviva's 'Very Strong' company profile, and capitalisation and leverage, as well as 'Strong' financial performance, and investment and asset risk.
Key Rating Drivers
Very Strong Business Profile: Our assessment of Aviva's company profile is driven by its position as one of the largest insurance groups in the
Fitch assesses Aviva's business profile as very strong, and ranks it as 'Favourable' compared with all other
Very Strong Capitalisation: Fitch assessment of Aviva's capital strength is driven by a Prism Factor-Based Capital Model (Prism FBM) score of 'Extremely Strong' at end-2022, unchanged from 2021's. It also considers Fitch-calculated Solvency II (S2) solvency capital requirement (SCR) ratio of 214% at end-2022, unchanged from end-2021's, which includes full credit for the surplus in its with-profits fund. Fitch continues to view the S2 level as supportive of the rating. Aviva's S2 ratio on a shareholder basis, which fully excludes with-profits funds, remained very strong at 200% at
Strong Financial Leverage: Aviva's Fitch-calculated financial leverage ratio (FLR) increased to 28% at end-2022 (end-2021: 22%). This largely reflects a reduction in shareholder equity following a capital return and dividend payments in 2022, which were partially offset by a subordinated debt redemption and issue of
The issuance of
Strong Operating Performance: Aviva's financial performance is strong, in Fitch's view. Operating profit strengthened 8% yoy to
Aviva's Fitch-calculated net income return on equity (ROE), excluding minority interests, was a negative 7% in 2022 (2021: 10%). This reflects an IFRS loss for the period of
Strong Fixed-Charge Coverage: Aviva's fixed-charge coverage (FCC) based on reported operating profit improved to 7x in 2022 from 5x in 2021, largely benefitting from lower interest costs and higher earnings. We expect FCC to remain commensurate with the ratings.
Low Exposure to Risky Assets: Fitch assesses Aviva's investment and asset risk as strong. Investment risk arises mainly through its credit risk exposure via its sizable annuity portfolio and equity risk in its
RATING SENSITIVITIES
Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
A significant decline in Aviva's operating performance for a sustained period
Weakening in capitalisation as measured by Fitch's Prism FBM score falling to the low end of the 'Very Strong' category
A significant increase in the FLR from current level on a sustained basis
Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
A sustained improvement in both the FLR and operating performance while maintaining 'Very Strong' capitalisation
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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