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| S&P revises its outlook on Prudential entitiesnews |
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Our Banking
Bureau
26 July 2002 |
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Our Banking
Bureau
26 July 2002
London:
Following its change in ratings of the UK life insurance
market to negative from stable, Standard and Poors (S&P)
has revised its outlook on the operating entities of the
Prudential insurance group. S&P has revised the outlook
for the group as well as the group holding company Prudential
Plc to negative from stable.
 The
outlook revision reflects concerns about the impact of
continued fall in equity markets on the UK life sector
and on requirements for the Prudential group to support
increased credit risk in its US operations through Jackson
National Life Insurance Company.
The negative outlook is not a precursor to a downgrade,
says Hans Wright, director, S&P Financial Services
Group, London. Financial flexibility the ability of
companies to source capital relative to capital requirements
is reduced as life fund capital is used to smooth investment
losses to policyholders and shareholders capital to cover
credit exposures in the US. In addition, while liquidity
is available, it will prove more difficult to raise long-term
capital in the current market conditions, whether by means
of fresh equity, debt, or reinsurance.
Although Prudential Assurance remains very strong relative
to most other players in the UK life market, the support
from shareholders capital required for the core US operations
and financial leverage at the holding company level creates
an additional strain for the group.
If
equity markets continue to fall and Prudentials capitalisation
significantly weakens with no prospect of recovery in
the short to medium term, the ratings on the group could
be lowered, but would remain very strong in the double-A
range, adds Wright.
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