Fitch Upgrades Aviva USA's IFS Ratings to 'AA-'; Outlook Stable

Fitch's rating actions reflect the agency's view that the integration of Aviva plc's November 2006 acquisition of AmerUs Group has been successfully completed, and that Aviva USA is benefiting from improved scale as well as the global brand, substantial resources and financial flexibility afforded by its U.K.-based parent, Aviva plc. (see Fitch release 'Fitch Upgrades Main Aviva Non-life Companies to IFS 'AA' dated Nov. 21, 2007.) Targeted run-rate cost savings of about $45 million have been achieved.

Aviva USA's increased financial flexibility includes implied capital support from the parent, which is expected to enable the U.S. to meet the parent's aggressive organic growth targets, which include a doubling of sales by Dec. 31, 2009. Capital support from the parent will be important, because the growth is causing statutory surplus strain. Aviva USA's operating leverage is also relatively high.

Fitch's concerns are increasing competitive pressures and the potential for below-target pricing in the company's core fixed indexed life and annuity markets. Fitch also believes that regulatory scrutiny and the potential for litigation are relatively high in these markets.

Fitch notes that Aviva USA has above-average exposure to below investment grade bonds in its investment portfolio. Subprime exposure, however, is nominal. Fitch believes that Aviva USA will benefit from Aviva plc's stronger oversight and risk management capabilities in both the sales and investment areas.

The following ratings were upgraded by Fitch with a Stable Outlook:

AmerUs Life Insurance Co.

--IFS to 'AA-' from 'A+'.

Indianapolis Life Insurance Company

--Issuer Default Rating (IDR) to 'A+' from 'A';

--Surplus notes to 'A' from 'A-';

--IFS to 'AA-' from 'A+'.

American Investors Life Insurance Co.

--IFS to 'AA-' from 'A+'.

Bankers Life Insurance Co. of New York

--IFS to 'AA-' from 'A+'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, . Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.