Moody's cuts Friends Prov on strategy challenges
LONDON, Aug 27 (Reuters) - Rating agency Moody's downgraded embattled British insurer Friends Provident on Wednesday, citing challenges to its revised strategy, and warned that uncertainty over its future was hampering its access to financial markets.
Friends FP.L, Britain's smallest blue-chip life insurer, has been overhauling its business since January, refocusing its core UK activities, cutting costs and putting non-core assets on the block, including its stake in fund manager F&C (FCAM.L) and high-end unit Lombard.
The company says both the units remain on the block, but it has been forced to give suitors more time to raise cash.
In a statement cutting its Insurance Financial Strength Rating for Friends Provident Life & Pensions to A3 from A2 and subordinated debt to Baa3 from Baa2, Moody's said Friends faced challenges to its bottom line and tough market conditions.
"Moody's believes that Friends Provident faces the challenge of significantly improving its performance from a relatively low trough, combined with a backdrop of very competitive market conditions," the agency said.
"This applies not only in the UK ... also in its less well-established International markets where the rating agency believes that Friends Provident's franchise is generally weaker than in the UK and where there exist large international as well as local competitors," Moody's said.
Friends posted a 20 percent drop in first-half pretax profit and a bottom-line loss, hit by tough conditions in its core pensions, protection and investment sales, as volumes dropped.
Moody's added it "believes that corporate uncertainty, exacerbated by recent poor results, has weakened Friends Provident's financial flexibility including access to capital markets", despite its low financial leverage.
Friends shares, which have virtually halved in value in the past 12 months, closed just after news of the downgrade at 92.9 pence, down 0.6 percent on the day. (Reporting by Clara Ferreira-Marques; Editing by Quentin Bryar)
