With Angelique Ruzicka, finance editor

Aviva escaped a downgrade by Moody’s this week. The ratings agency has awarded Aviva Group with an AA3 rating with a negative outlook.

Moody’s said it was encouraged that Aviva’s Q1 figures showed a £500m boost to its capital and that it had grown its bancassurance division.

The agency evaluated Aviva’s corporate bond, equity, property and structured finance portfolio and found that it was comfortable with the steps Aviva had taken to protect its assets. However, Moody’s said a downgrade could be likely in the event that the capital surplus slipped below £1.5bn, if long-term return on equity fell below 7% or if there was a deterioration of the insurer’s core operating earnings.

Speculation still surrounds Aviva’s 2009 dividend. Pan Demetriades, insurance analyst at Execution, predicts Aviva will have to cut its dividend by 30% to avoid dipping into its capital base.