S&P offers Provident rating boost

Standard and Poor's has given Provident a vote of confidence following its acquisition by the French Covea Group after signalling that its rating is likely to be upgraded when it is next assessed.

The rating agency has held its rating on Provident at 'BB+', but placed it on ‘CreditWatch with positive implications’, meaning that it will take a fresh look at the specialist motor insurer’s ratings once its sale has been approved by the FSA with the likelihood that this will result in an upgrade.

An upgrade for Provident would return its rating to investment grade.

Covea announced last week that it is acquiring Provident from its former American owner GMAC.

Standard & Poor's credit analyst Anvar Gabidullin said: ”The CreditWatch listing reflects our expectation that, following the official completion of the acquisition, there will no longer be any constraint on the ratings on Provident Insurance from its current parent. We could, therefore, raise the ratings on Provident Insurance by up to two notches to match its stand-alone credit profile.”

"We will resolve our CreditWatch listing pending approval of the acquisition by the Financial Services Authority and based on our assessment of Provident Insurance's position within the acquirer's group and any changes to its stand-alone financial and business characteristics after the acquisition.”

The ratings on Provident Insurance reflected the agency’s view of its good stand-alone credit characteristics, including its "very conservative investments and strong capitalization".

It said Provident’s operating performance has historically been strong, although it weakened considerably in 2009.

However, the agency said that the company’s efforts to improve its underwriting performance over the last two years, meant that it was expected to return to profitability in 2011.