OREANDA-NEWS. Fitch Ratings has affirmed Aviva Plc's (Aviva) Long-Term Issuer Default Rating (IDR) at 'A+' and the core insurance subsidiaries' Insurer Financial Strength (IFS) ratings at 'AA-'.

The Outlooks are Stable. A full list of rating actions is available at the end of this commentary.

KEY RATING DRIVERS

The ratings reflect Aviva's strong position in the group's key markets, diversification by business line, robust capital position and operational scale. Aviva's ratings also benefit from the group's geographical diversification across the UK, Europe, Canada and Asia.

Aviva has strong life insurance market positions in the UK, France, Italy and Spain, and exposure to insurance growth markets in Poland, Turkey and Asia. The group has leading non-life market positions in the UK (1st), Canada (2nd) and France (10th). Aviva's market position in Canada will be strengthened by the group's acquisition of RBC General Insurance Company, which was announced in January 2016.

Aviva's capitalisation, as measured by Fitch's Prism factor-based capital model (Prism FBM), is 'extremely strong' based on end-2015 results (end-2014 'extremely strong'). Aviva's financial leverage improved to 24% (end-2015) from 27% (end-2014), but remains high for the ratings, in Fitch's view.

Aviva's profitability remains supportive of the ratings, despite the Fitch-calculated net income return on equity (ROE) weakening to 7% in 2015 (2014: 15%). The ROE comparative weakness is partly attributable to the accounting impact of Aviva's acquisition of Friends Life. The group reported a stable operating ROE of 13% in 2015 (2014: 14%). Fitch expects synergies resulting from the acquisition to provide long-term support to Aviva's profitability.

RATING SENSITIVITIES

Key rating triggers that could result in a downgrade include capitalisation, as measured by Fitch's Prism FBM, falling to a low level in the 'very strong' category, or financial leverage increasing above 30%.

Fitch views an upgrade as unlikely in the near term, unless Aviva sees a sustained improvement of financial leverage to below 20%.