Following the acquisition of Aviva USA by Athene
OLDWICK, N.J., October 7, 2013—A.M. Best Co. has downgraded the financial strength rating (FSR) to B++ (Good) from A- (Excellent) and the issuer credit ratings (ICR) to “bbb+” from “a-” of Aviva Life and Annuity Company (ALAC) (West Des Moines, IA) and its wholly owned subsidiary, Aviva Life and Annuity Company of New York (ALACNY) (Melville, NY) (together referred to as Aviva USA).
All ratings have been removed from under review with negative implications and assigned a stable outlook. These actions follow the completed acquisition of Aviva USA by Athene Holding Ltd (Athene), which was announced in December 2012. Concurrently, A.M. Best has affirmed the FSR of B++ (Good) and ICR of “bbb +” of Athene Annuity & Life Assurance Company (Athene Annuity) and its subsidiary, Investors Insurance Corporation (IIC), which will be merged into Athene Annuity by year-end 2013, along with Presidential Life Insurance Company (PLIC) (Nyack, NY).
The outlook for these ratings is stable. The rating actions for Aviva USA, Athene Annuity and PLIC reflect the common ownership by Athene and the anticipated new annuity sales disruptions given the change in ownership as product changes become implemented and shared among the companies. Additionally, the ratings of Aviva USA reflect the possible volatility in financial results over the intermediate term resulting from post-closing issues related to the Aviva USA transaction, which the company needs to get past in order to establish core trends for rating purposes, and the continued risks associated with the integration of a much larger entity of almost three times the size of Athene’s current organization.
While A.M. Best remains concerned regarding these risks associated with the integration and the potential volatility in financial results over the intermediate term, A.M. Best notes that Athene has established a history of successful acquisition integration while establishing an early trend of profitability. Offsetting these negative rating factors are Athene’s anticipated adequate level of risk-adjusted capitalization post acquisition, a track record of successfully acquiring smaller to medium-sized transactions with a demonstrated ability to achieve earnings accretion early on and an experienced management team in the annuity business with a history of capital support from institutional investors. Upward rating movement could be achieved after Athene Annuity demonstrates a history of stable earnings, strong financial performance and minimal disruptions from the Aviva USA integration.
Downward rating actions could result if the organization experiences operating losses, poor investment performance or holds lower levels of risk-based capitalization. In addition, negative integration outcomes could put into question the viability of Athene to effectively expand retail operations or achieve profitable growth. The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology. A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.