LONDON (Alliance News) - Standard Life PLC on Thursday had its credit rating increased by Standard & Poor's, which said higher earnings from money management provide significant levels of unrestricted cash flow and put the FTSE 100 company in a better position to service its debt.
S&P Global Ratings improved its local currency long-term counterparty credit rating on Standard Life to A from A-, and raised its rating on the company's non-guaranteed subordinated debt to BBB+ from BBB. S&P's outlook on the ratings remains stable.
"The increased earnings from SLI, in our view, provide a significant level of unrestricted cash flow to the holding company, particularly when compared with the cash flows from its insurance operation, SLAL, which is subject to more regulatory restrictions, notably at times of stress," S&P said in a statement.
Managing money for institutional investors has become the most important part of Standard Life in terms of its shift towards a fee-based business model. The insurer and asset manager has itself said the move away from traditional spread/risk business, under which it must commit its balance sheet to providing guaranteed levels of income to annuitants, makes the company more resilient amid times of volatility or stress in financial markets.
The shift accelerated with the acquisition of Ignis Asset Management in July 2014 and completing the sale of its Canadian companies to Manulife in February 2015.
According to S&P, Standard Life Investments generated 51% of Standard Life's operating earnings in 2015, up from 42% in 2014. The majority was due due to the third party asset management business as the Standard Life Assurance Co's asset management operations, the ratings agency said.
"Over 2016-2018, we expect the proportion of earnings generated by SLI to remain significant--supported by the group's increased focus on asset management in recent years, particularly following the sale of the Canadian operation and purchase of Ignis. We believe that operating profit generated only by SLI will be more than sufficient to cover the debt obligations of the holding company," S&P said.
Shares in Standard Life were flat at 319.2 pence on Thursday.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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