A.M. Best Assigns Ratings to Aviva Group; Assigns Issuer Credit Rating to AVIVA plc.

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

These ratings are based on Aviva's leading business position, strong financial performance and strong risk-based capitalisation. The main offsetting factor is the significant use of Fund for Future Appropriations (FFA) and Value of In Force business (VIF) as part of its economic capital, in line with a number of its peers.

Leading business position -- A.M. Best believes that Aviva has a well diversified business profile being one of the leading insurance providers in the United Kingdom and holding top 10 positions in several European markets. Additionally, it holds strategic positions in a number of emerging economies, including Eastern Europe and the Far East. In the U.K. life segment, the strength of the brands under which Aviva operates has helped the group refocus its operations away from traditional with-profits business and toward protection and unit-linked products. Its non-life business mainly focuses on personal insurance, and the group is the leader in the United Kingdom and Ireland and also holds a top five position in Canada and the Netherlands. In Europe, distribution agreements with locally well-known banks are leading to increased penetration in several markets. Aviva's consolidated gross premiums remained stable during the first six months of 2004 (compared to the same period of the previous year), reflecting the group's resilience under difficult market conditions.

Strong financial performance -- Aviva's 2003 return to profitability (after three years of losses) has continued in 2004, with the group announcing net after-tax profits of GBP 263 million (USD 468 million) for the first half of the year.

A.M. Best expects the long-term profitability of the group to improve, driven by the higher margins on life business written during the last year. Results on a statutory basis are likely to be negatively affected by reduced contributions from with-profits business, new business strain from the expanding protection portfolio and the guarantees of some unit-linked products, as well as increased interest payouts due to the subordinated debt issue of 2003. In addition, A.M. Best expects the current fast growth and high profitability arising from markets like Spain and Italy to begin stabilising to lower levels in 2005.

The combined ratio of non-life business is likely to remain stable at around 100%, mainly assisted by the long-term impact of the cost reduction programme (initiated by the group in 2002) and the corrective actions focusing on the Canadian operations.

Strategic operations such as the operations in Central Europe, India and China are expected to contribute to further earnings diversification, providing greater stability on overall results.

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 offset by the increase in economic capital driven by profit retention and further recovery of the FFA. Apart from the FFA (which includes an estimated GBP 4.2 billion (USD 7.6 billion) of orphan estate), the company makes significant use of subordinated debt and VIF business as part of its economic capital, which is in line with the practice followed by some of its key competitors.

A.M. Best believes that Aviva's financial flexibility remains strong, with an adequate level of debt cover.

The following member companies of Aviva have been assigned a financial strength rating of A+ (Superior) and an issuer credit rating of "aa-":

--  CGU International Insurance plc
    --  Norwich Union Insurance Limited
    --  Commercial Union Life Assurance Company Limited
    --  CGNU Life Assurance Limited
    --  Norwich Union Linked Life Assurance Limited
    --  Norwich Union Life & Pensions Limited
    --  Norwich Union Annuity Limited

The following senior debt issues have been assigned a rating of "a":

AVIVA plc--
    --  GBP 198 million 9.5% guaranteed bonds due 2016
    --  GBP 199 million 8.625% guaranteed bonds due 2005

The following subordinated debt issues have been assigned a rating of "a-":

AVIVA plc--
    --  GBP 800 million 6.125% perpetual subordinated notes
    --  EUR 800 million step up subordinated notes due 2021
    --  GBP 700 million 6.125% callable fixed rate reset subordinated
         bonds due 2036
    --  EUR 650 million callable notes due 2023
    --  EUR 500 million perpetual notes

For a list of A.M. Best's debt ratings, please visit http://www.ambest.com/debt.

For current Best's ratings, independent data and analysis on more than 3,000 individual property/casualty companies, groups and industry composites, please visit http://www.ambest.com/pc.

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.