A.M. Best Affirms Ratings of AVIVA Group.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) and the issuer credit rating (ICR) of "aa-" of the core companies of the AVIVA Group (AVIVA) (United Kingdom). At the same time, A.M. Best has affirmed the ICR of "a" of the non-operating holding company, AVIVA plc. A.M. Best has also affirmed the ratings of a number of debt securities issued by AVIVA plc. (See link below for a detailed listing of ratings.) The outlook for all ratings remains stable.

These ratings are based on AVIVA's leading business position, strong financial performance and strong risk-based capitalisation. The main offsetting factor remains the high degree of "soft elements" forming part of AVIVA's economic capital, which is in line with a number of its peers. Despite this, A.M. Best believes that AVIVA's financial flexibility remains strong, with an adequate level of debt cover.

Leading business position--A.M. Best believes that AVIVA has a well diversified business profile as it is the leading personal lines insurance provider in the United Kingdom with increasing presence in several European markets. Long-term business represents about 64% of total premium, while general insurance--mainly domestic lines--generates 31% of the business, with the remaining 5% originating from fund management operations. In the United Kingdom, the strength of AVIVA's brands and distribution network has helped the group maintain top market positions in most life and non-life product lines. AVIVA is also the industry leader in Ireland and holds top five positions in Canada and the Netherlands. A.M. Best anticipates AVIVA will continue to increase its focus on Continental Europe, while the recent acquisition of RAC will further improve an already strong general insurance business.

Strong financial performance--A.M. Best expects AVIVA to continue generating strong pre-tax operating results as shown in the last two years, with total profits after tax in excess of GBP 1 billion (USD 1.8 billion) for the year 2005. Profitability should continue to benefit from business expansion, particularly in general insurance in the United Kingdom and life international business, with slightly reducing margins due to competitive pressures. The combined ratio of non-life business is likely to remain below 100%, mainly assisted by recent pricing actions and decreasing expenses as a result of several cost management initiatives.

Strong risk-based capitalisation, albeit with significant use of "soft" capital--AVIVA's prospective risk-based capitalisation is likely to remain strong as the pressures from increased business volumes are expected to be met by retained profits from an expanding business, albeit with slightly decreasing margins, and the recent hybrid debt issues.

AVIVA's consolidated capital structure continues to shift toward increasing levels of "soft" capital (namely subordinated debt, value of in-force business and Unallocated Divisible Surplus (UDS)), which is in line with a number of its competitors.

A.M. Best believes that AVIVA's financial flexibility remains strong and is further enhanced by an estimated orphan estate of GBP 4.5 billion (USD 8.0 billion)--included in the UDS--which could be used to write new business within the with-profits funds.

For a complete listing of AVIVA Group's financial strength, debt and issuer credit ratings, please visit http://www.ambest.com/press/081101aviva.pdf.

For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.