Fitch shows concern over Standard Life's withdrawal

Fitch has changed the rating watch on the 'A' insurer financial strength (IFS) ratings of Resolution’s operating entities to rating watch negative from rating watch evolving.

The entities affected are Scottish Mutual Assurance Ltd (SMA), Scottish Provident Ltd (SPL) and Phoenix Life Assurance Limited (formerly Abbey National Life Plc).

They were all placed on rating watch evolving on 12 October 2007.

Fitch has also placed on rating watch negative the long-term issuer default ratings (IDR) of Resolution, SMA and SPL, all currently at 'A-', as well as Resolution's £500m 6.5864% innovative tier 1 debt (rated 'BBB') and SMA's subordinated debt issue (rated 'BBB+').

The rating watch actions on Resolution reflect the announcement by Standard Life that it has decided not to increase or restructure its offer for Resolution and accordingly does not expect its offer to be implemented.

Fitch views the alternative offer for Resolution made by Pearl as potentially detrimental to Resolution's credit quality. In Fitch's opinion, Pearl's current capital management strategy is more aggressive than Resolution's and, if continued, would adversely affect Resolution's capital strength.

The agency also believes that a transaction with Pearl could present significant integration risks relative to the limited synergies available from combining the closed funds of Pearl and Resolution.

Fitch expects to resolve Resolution's Ratings Watches once a transaction is finalised or if Pearl's offer is withdrawn