S&P mulls Pru ratings cut over debt concerns

Standard & Poor’s is considering cutting its rating on Prudential over leverage concerns following its $35.5bn deal to buy AIG’s Asian business.

Fund managers have also expressed concern about the price Pru has paid to become the biggest insurer in Asia.

S&P is concerned the deal will dilute one of Prudential's biggest ratings strengths, its successful UK business, according to reports.

The ratings agency's long-term counterparty rating for Pru is A-plus, one of the highest, but this could be cut slightly on debt concerns.

S&P says: "The transaction likely will have a material adverse impact on Prudential's key credit metrics, such as capitalization and fixed-charge coverage."

LV Asset Management's Michael Crawford, who sold Pru shares at the end of last year, says the insurer paid too high a price for AIG's Asian business.

"We're a bit skeptical of the price, given that others may have looked at it and decided against it, which is why AIG went for the IPO," he says.

Pru's shares fell 12% yesterday, and have fallen over 5% today to 499.9p.