S&P has also lowered its long term junior subordinated debt rating on SL Finance PLC--which is guaranteed by Standard Life--to 'A-' from 'A'. In addition, the counterparty credit ratings on Standard Life Bank (SLB) were lowered to 'A-/A-2' from 'A/A-1'. The outlook on Standard Life Bank is negative. According to S&P the downgrade of the bank reflects the rating action on Standard Life, rather than any factors specific to the bank.

"The downgrade of Standard Life reflects concerns over the group's ability to manage its reputation with policyholders and investors. There is increased pressure on the group's franchise, and the underlying financial position appears weaker than originally understood," says S&P's credit analyst Manish Bakhda. "Furthermore, there are execution risks in managing changes emerging from the impending strategic review announced today," he adds.

According to S&P, while the outlook is negative the key drivers of future rating actions will include the terms of the proposed hybrid issue and the outcome of the strategic and Financial Services Authority reviews. In addition, S&Ps will monitor management's ability to execute the recommendations of the reviews and to manage relationships with the policyholders, media, UK regulator, and investors.

Adverse outcomes in any of the above circumstances, either individually or collectively, may lead to a further downgrade, warns S&P.

In India, Standard Life is a joint venture partner in the HDFC Standard Life Insurance Company.