S&P ups Royal London rating to 'positive'

Standard & Poor's (S&P) has improved Royal London's rating outlook to ‘positive', saying the life company is now a more competitive force in the UK market place.

S&P says the outlook revision reflects several years of Royal London demonstrating a strong strategy to improve its business operations.

An expanded product offering and distribution has also helped up the company's rating the agency adds.

Previously the life company had been rated at ‘stable'.

The global ratings agency also reaffirmed Royal London's rating as A-.

S&P says Royal London is now "well placed to compete in the UK life and pensions market", reflecting the group's strong management and capitalization.

However S&P adds these strenghts are partially offset the group's dependence on the U.K., where it is a "mid-sized player", and in particular, its exposure to the competitive U.K. pensions market.

S&P's credit analyst Sanjay Joshi says: "We consider  industry and economic risks in the U.K. life market to be elevated, weighing on credit quality for insurers operating in this sector.

"We consider Royal London's concentration in the U.K. life market exposes it to these risks and to changes in the competitive landscape."

Mike Yardley, group chief executive of Royal London, says in an environment of ongoing turbulence in the life and pensions sector, the improvement in S&P's outlook for Royal London is a "strong endorsement" of the group's offering.

"S&P has also identified the challenges that we face, in common with others in the UK life and pensions sector. Not least is the margin pressure in the pensions market, especially corporate pensions.

"This is something which we will continue to take a proactive lead in addressing."

S&P also notes the Royal London "management has delivered significant efficiencies, cutting the cost base in half while significantly improving service quality".