Moody's cuts ratings on Prudential PLC's UK insurance unit

Moody's Investors Service cut its credit ratings on Prudential PLC's (PUK) main U.K. insurance business, Prudential Assurance Co., because of lower solvency surplus levels in 2008 as well as the global economic downturn in the fourth quarter, reports Dow Jones.
The solvency surplus levels fell because significant declines in equity values and government-bond yields, as well as increasing stock volatility. Moody's expects the surpluses to remain vulnerable to stock market declines and volatility this year despite the company's hedging strategy. About 40% of Prudential Assurance's business investments were in equity securities and portfolio holdings in unit trusts at the end of 2008, the newswire said.
Another reason for the downgrade was Prudential's focus on higher-margin products despite its increased market share in 2008 and retail business growth of 10%. Despite the downgrade, Senior Credit Officer Dominic Simpson said Prudential Assurance has one of the financially strongest life funds in the U.K, it added.