S&P downgrades NU after reattribution move

Standard & Poor’s has downgraded the outlook of Norwich Union Life’s main with-profits funds to negative from stable following the deal to reattribute its inherited estate announced by its owner Aviva yesterday.

Standard & Poor's credit analyst Charis Adu-Kwapong said of the nearly £5 billion pool in surplus assets built up in the NULAP, CULAC and CGNU with-profits funds would inevitably lead to a ‘dilution of capital quality'.

S&P has previously given these funds a higher rating than other Aviva businesses because of the backing of the inherited estate. This would no longer be appropriate, it said.

Adu-Kwapong said: ‘The negative outlooks on Norwich Union Life entities reflect Standard & Poor's expectation that the proposed reattribution will increasingly align policyholder security of Norwich Union Life with other core shareholder-backed businesses of Aviva.’

He expected that capital adequacy in the funds to be maintained at very strong levels, adding that the funds’ credit ratings would move down ‘a notch’ in line with other core Aviva businesses.

Prudential recently cancelled its plans to reattribute its inherited estate saying it did not want to compromise the strength and prospects of its with profits fund.