Standard & Poor's credit rating
There are a number of ways of determining the financial strength
of providers. The simplest is the rates these providers are
given by independent credit rating agencies such as Standard
& Poors. This is a measure of the capacity to meet policyholder
obligations under a variety of economic and underwriting conditions.
The ratings are as follows:
| Standard & Poor's credit rating |
| AAA |
Superior |
| |
Superior financial security on an
absolute and relative basis. Capacity to meet policyholder
obligations is overwhelming under a variety of economic
and underwriting conditions. |
|
| AA |
Excellent |
| |
Excellent financial security. Capacity
to meet policyholder obligations is strong under
a variety of economic and underwriting conditions. |
|
| A |
Good |
| |
Good financial security but capacity
to meet policyholder obligations is somewhat susceptible
to adverse economic and underwriting conditions. |
|
| BBB |
Adequate |
| |
Adequate financial security but capacity
to meet policyholder obligations is susceptible
to adverse economic and underwriting conditions. |
|
| BB |
May be adequate |
| |
Financial security may be adequate,
but capacity to meet policyholder obligations, particularly
with respect to long term or "long trail"
policies, is vulnerable to adverse economic and
underwriting conditions. |
|
| B |
Vulnerable |
| |
Vulnerable financial security. Currently
able to meet policyholder obligations but capacity
to meet policyholder obligations is particularly
vulnerable to adverse economic and underwriting
conditions. |
|
| CCC |
Extremely
vulnerable |
| |
Extremely vulnerable financial security.
Continued capacity to meet policyholder obligations
is highly questionable unless favourable economic
and underwriting conditions prevail. |
|
| NR |
Not Rated |
| |
Financial security not rated. Standard
& Poor's has not been requested to rate the
capacity to meet policyholder obligations. |
|
|
Moody's credit rating
Another major independent credit rating agency is Moodys that
provide a similar rating as Standard & Poors. Again Moodys credit rating
is a measure of the capacity to meet policyholder obligations
under a variety of economic and underwriting conditions. The
ratings are as follows:
| Aaa |
Exceptional |
| |
Insurance companies rated Aaa offer
exceptional financial security. While the financial
strength of these companies is likely to change,
such changes as can be visualised are most unlikely
to impair their fundamentally strong position. |
|
| Aa |
Excellent |
| |
Insurance companies rated Aa offer
excellent financial security. Together with the
Aaa group, they constitute what are generally known
as as high-grade companies and rated lower than
Aaa companies because long-term risks appear somewhat
larger. |
|
| A |
Good |
| |
Insurance companies rated A offer
good financial security. However, elements may be
present which suggest a susceptibility to impairment
sometime in the future. |
|
| Baa |
Adequate |
| |
Insurance companies rated Baa offer
adequate financial security. However, certain protective
elements may be lacking or may be characteristically
unreliable over any length of time. |
|
| Ba |
Questionable |
| |
Insurance companies rated Ba offer
questionable financial security. Often the ability
of these companies to meet policyholder obligations
may be very moderate and thereby not well safeguarded
in the future. |
|
| B |
Poor |
| |
Insurance companies rated B offer
poor financial security. Assistance of punctual
payment of policyholder obligations may be very
moderate and thereby not well safeguarded in the
future. |
|
| Caa |
Very Poor |
| |
Insurance companies rated Caa offer
very poor financial security. They may be in default
on their policyholder obligations or there may be
present elements of danger with respect to punctual
payment of policyholder obligations and claims. |
|
| Ca |
Extremely
Poor |
| |
Insurance companies rated Ca offer
extremely poor financial security. Such companies
are often in default on their policyholder obligations
or have other marked shortcomings. |
|
| C |
Lowest |
| |
Insurance companies rated C are the
lowest rated class of insurance company and are
regarded as having extremely poor prospects of ever
offering financial strength. |
|
|
With Profit strength
In addition information is available regarding the providers
total assets under management (TA), free assets (FA) and free
asset ratio as follows:
| With Profit financial strength |
| Life company |
S & P |
TA (£bn) |
FAR |
FA (£m) |
| AXA |
AA |
£555 |
9.5% |
£1,081 |
| Britannic |
BBB |
£15 |
6.4% |
£440 |
| Clerical Medical |
AA |
£62 |
9.5% |
£2,039 |
| Eagle Star |
A- |
£16 |
4.5% |
£526 |
| Friends Provident |
AA- |
£66 |
7.7% |
£1,775 |
| Legal & General |
AAA |
£120 |
7.1% |
£2,757 |
| Liverpool &
Victoria |
BBB |
£6.5 |
13.6% |
£541 |
| MGM Assurance |
NR |
£1.3 |
3.3% |
£45 |
| Norwich Union |
AA |
£200 |
8.9% |
£2,866 |
| NPI |
A+ |
£100 |
4.6% |
£758 |
| Royal London |
NR |
£21 |
5.6% |
£1,185 |
| R & S Alliance |
NR |
N/A |
6.1% |
£681 |
| Prudential |
AA+ |
£163 |
7.3% |
£5,672 |
| Scottish Equitable |
AA+ |
£185 |
6.9% |
£803 |
| Scottish Mutual |
A- |
£15 |
3.3% |
£503 |
| Scottish Provident |
NR |
£10 |
5.8% |
£536 |
| Scottish Widows |
AA |
£76 |
6.6% |
£1,521 |
| Standard Life |
AA |
£80 |
5.0% |
£3,356 |
| Winterthur Life |
A |
£528 |
2.4% |
£144 |
| Abbreviations - S & P: Standard
& Poor's rating; FAR: free asset ratio; TA: total assets under management in £ billions;
FA: free assets (assets over liabilities of the
With Profit fund) in £ millions free
annuity quote. |
|
|
The total assets under management relate to policyholders investments.
The free assets relate to the assets of the life company and
the free asset ratio shows the percentage of the assets of the
company over the liabilities.
|
