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Standard sparks questions over value of rating agencies

Some insurers and IFAs are starting to question the value that big rating agencies such as Standard & Poor&#39s and Moodys offer to financial advisers in the wake of the Stan- dard Life strategic review.

Both S&P and Moodys moved to downgrade Standard after announcements that the firm had been in discussions with the FSA over calculations of its realistic balance sheet and was launching a strategic review which could lead to its demutualisation.

One industry expert says this is the third time that these agencies have acted after the fact, pointing to previous examples of Equitable Life, AMP NPI and now Standard, leaving questions over the costly ratings.

However, others say agencies carry out vigorous analysis of insurers&#39 financial acc-ounts but spotting misinformation or even fraud is not their job but the regulator&#39s role.

Independent consultant The Abacus partner Philip Martin says: “Clearly, the agencies&#39 belief that their ratings reflect a deep understanding of life company financial positions has been shown to be utterly flawed.”

John Joseph Financial Services managing director John Joseph says: “I would put more faith in Ned Cazalet at the moment than I would in Standard & Poor&#39s.”

S&P communications director Lisa Hall says: “Back in January 2003, Standard & Poor&#39s downgraded Standard Life to AA, then in July, AA with a negative outlook before the latest downgrade to A+ with a negative outlook. These are indicators to the market of S&P&#39s changing opinion on Standard Life which reflects concerns over the group&#39s ability to manage its reputation with policyholders and investors.”

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