Insurers’ credit ratings cut

Standard & Poor's has cut its long-term counterparty credit rating on Aviva, to A from A+ and said the outlook is negative.

"The rating actions reflect our view that current challenging operating and financial market conditions have put pressure on certain key credit fundamentals supporting the nonstandard ‘one notch’ difference between the rating on Aviva PLC and that on its core operating subsidiaries," said Standard & Poor's credit analyst Charis Adu-Kwapong. "These fundamentals include reduced cash flows from subsidiaries, increased double leverage, and a holding company debt structure benefiting only from limited upstream guarantees," he added.

S&P said the quantum and diversity of cash flows from subsidiaries is expected to come under pressure during 2009 and 2010 due to adverse investment market conditions. It said the Netherlands, France, Ireland, and the UK would generate reduced cash flows to the group over the next two years.

Negative outlooks

• Rating agency Fitch Affirms downgraded Allianz’s outlook to negative, suggesting it credit rating will fall within the next two years. “The negative outlook reflects Fitch's view that difficult conditions in global financial markets are likely to continue, which could make it challenging for Allianz to return to its previous level of profitability,”
• S&P revised Zurich’s outlooks to negative from stable. "The outlook revision follows our review of European global multiline insurers announced on Feb. 24, and is based on our opinion of the weakening of the group's risk-based capital adequacy as of year-end 2008 according to our model, amid the continued difficult financial market conditions," said S&P credit analyst Hiltrud Besgen.