Moody’s says the review reflects its belief that Aviva may be less well positioned than similarly rated peers to maintain a level of financial strength consistent with an Aa range rating if the current severe disruption in the financial markets continues.
Aviva’s capital position remains exposed to further deterioration, principally through further asset writedowns, the firm says.
It adds that while Aviva’s core profitability is good, it is under pressure due to the relative importance of life insurance business earnings in the UK and Europe, which are likely to experience increasing pressure as the recession continues.
The review will focus on the sensitivity of capital metrics on both an insurance group directive and individual capital assessment basis to further stressed market conditions.
Moody’s will also review the asset portfolios, including the commercial mortgage portfolio and will assess the capital strategy of the group following the announcement that it will maintain the year-end dividend at the 2007 level of 33p.
Aviva reported a 2008 post-tax IFRS loss of £885m and an unrealised loss of 8 per cent of its balance sheet. The results take into account £304m of non-life latent reserve strengthening and £550m of provisions for corporate bond and commercial mortgage exposure on top of increased impairments.