A.M. Best Affirms Ratings of AVIVA plc and Its Subsidiaries.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of "a+" for the subsidiaries of the non-operating holding company, AVIVA plc (AVIVA) (United Kingdom). A.M. Best also has affirmed the ICR of "a-" and the ratings on the debt securities issued by AVIVA. Additionally, A.M. Best has withdrawn the FSR of A (Excellent) and ICR of "a+" for AVIVA Courtage (France) after its business was merged into AVIVA Vie (France) in 2008. The outlook for all ratings is stable. (See link below for a detailed listing of the companies and ratings.)

The ratings reflect AVIVA's improving risk-adjusted capitalization and financial performance, resulting from improving market conditions, management initiatives and its diversified business model. Offsetting factors are the increase in financial leverage, as well as operational risks associated with AVIVA's ongoing restructuring of its European operations.

AVIVA strengthened its risk-adjusted capital position in 2009 through a number of initiatives including the sale of its Australian business for GBP 452 million, issuance of hybrid debt amounting to GBP 900 million over the 12 months to July 2009, as well as increased use of hedges to protect its equity portfolio. However, the debt issuance has significantly increased the group's financial leverage. In A.M. Best's opinion, the group's increasing focus on efficient capital usage in the writing of new business should also be able to mitigate any impact on risk-based capitalization levels.

A.M. Best's viewpoint is the group's Netherlands business, Delta Lloyd N.V., continues to have a higher investment risk appetite than the rest of the AVIVA group, despite having suffered a significant portion of the group's total investment losses in 2008. Nevertheless, A.M. Best believes that AVIVA's recently completed initial public offering of 42% of the shareholding of Delta Lloyd N.V. will lead to a significant reduction in the group's risk exposure from this operation while improving its financial flexibility.

As part of its "One AVIVA" strategy, the group is currently going through a restructuring of its European operations, which will see transformation of some of its 12 separate businesses across Europe into branches, with one pan European holding company based in Ireland. A.M. Best expects the anticipated improvements in governance and operational control, as well as simplification of products and processes will lead to enhanced risk management, financial performance and fungibility of capital in the medium term. However, this exposes the group to additional operational challenges in the short term. In addition, the impact of these changes on AVIVA's business profile is uncertain.

A.M. Best estimates that in line with the rest of the market, AVIVA's investment performance will remain subdued but positive in 2009, following the absence of investment losses in the company's third quarter 2009 year-to-date results (GBP 2 billion loss for full year 2008).

For a complete listing of AVIVA plc and its domestic and international property/casualty and life/health subsidiaries, FSRs, ICRs and debt ratings, please visit www.ambest.com/press/111203aviva.pdf.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.