Liverpool Victoria Friendly’s core operating entities, Liverpool Victoria Insurance and Highway Insurance, have both been assigned ‘BBB+’ insurer financial strength ratings by Standard & Poor’s with a stable outlook.
S&P’s release follows :
The ratings reflect the relative strengths and weaknesses of the group (LVFS). Standard & Poor’s considers the strengths to be LVFS’ improving competitive position, good level of capitalization, and its strong investment profile. Constraining factors are current and historical operating performance, and the relatively concentrated exposure to both the motor market within the non-life space and more-specialist life-insurance products. In addition, the group is fully exposed to the U.K. insurance operating environment and future changes in its competitive landscape.
We consider the strengthening of the group’s competitive position since 2006 to be positive for the rating. The group has predominantly focused on repositioning toward products aligned with its strategic aims in the life and non-life insurance markets, and obtaining a top-five position in these chosen markets. In addition, there has been a focus on improving group brand awareness, further strengthening the management team, and improving efficiency. We expect to see LVFS’ position in its chosen markets strengthen further over the rating horizon.
The predominant constraint on the rating is current operating performance. Although earnings continue to improve, this remains a rating weakness. LVFS exhibits diversity in terms of earnings provided by the composite business model. However, this is somewhat offset by the concentration on the motor insurance market within the non-life insurance space and the smaller and more-specialist markets in the life insurance space. The concentration within the U.K. market exposes the group to the current competitive and challenging operating environment.
The stable outlook reflects our expectation that LVFS will maintain its current competitive position in its chosen markets and its good capital position. These are both rating strengths. We also expect operating performance to be resilient, despite prospective changes to conditions in both the non-life and life insurance markets.
A positive rating action on LVIC and Highway may be taken if:
– The group improves its financial profile by continuing to improve operating performance in all business segments. Measurement of this would be based on sustained and significant improvements in operating profits. In particular, this would result from consistently achieving combined operating ratios of below 100%, but also from generating sustained increases in profits from the life business by increasing the scale of new business; and
– The group achieves strong capitalization; or
– The group improves its business profile by further strengthening its competitive position. This would be measured by market share in its chosen markets and also through increased operating profits.
A negative rating action may be taken on LVIC and Highway if LVFS fails to:
– Maintain good capitalization; or
– Produce positive trends in operating performance, based on increased operating profits; or
– Maintain its competitive position in its chosen markets.
A negative rating action may also be taken if we no longer assess the non-life operations as core under our group methodology.
Source : S&P
