Capital management
Rating agency capital
Agency ratings are an important indicator of financial strength and support access to debt markets as well as providing assurance to business partners and policyholders over our ability to service contractual obligations. In recognition of this we have solicited relationships with a number of rating agencies. Rating agencies generally assign ratings based on an assessment of a range of financial (e.g. capital strength, gearing, liquidity and fixed charge cover ratios) and non financial (e.g. competitive position and quality of management) factors.
As a part of this, certain rating agencies have proprietary capital models which they use to assess available capital resources against capital requirements as a component of their overall criteria for assigning ratings. Managing our capital and liquidity position in accordance with our target rating levels is a core consideration in all material capital management and capital allocation decisions.
The group’s overall financial strength is reflected in our ratings. In May 2009 Moody’s reaffirmed the group’s rating at Aa3 (“excellent”) with a Negative outlook, in line with the UK sector. The group’s rating from Standard and Poors is AA– (“very strong”) with a Negative outlook, and A (“excellent”) from A M Best with a Stable outlook. These ratings continue to reflect our strong competitive position, positive strategic management, strong and diversified underlying earnings profile and robust liquidity position.