The agency affirmed the insurer financial strength ratings on Prudential Assurance Company at AA+ and on the group’s operations in the US at AA although the outlooks on IFS and IDR are Negative.
The downgrades reflects Fitch’s view that the firm’s exposure to volatile credit and investment market conditions is adversely affecting its investment results and earnings.
Fitch believes these pressures are more acute for the holding company ratings, reflecting their subordination relative to obligations of the operating companies.
Prudential previously benefited from a ratings uplift due to the group’s broad diversification but Fitch has reduced the uplift for diversification it gives in the light of the current global financial crisis and greater correlation of risks under stress.
The affirmation of PAC’s IFS rating reflects the continuation of the company’s very strong capital position despite recent pressures, its track record of with-profits investment returns in excess of general market performance and its strong risk management framework, particularly with respect to asset-liability management, according to Fitch.
But its negative outlook reflects its view that difficult conditions in global financial markets are likely to continue, which could cause higher than expected volatility in financial results and additional challenges in 2009.