Guardian may benefit from the support of GRE, but 'with a parent heavily involved in UK general insurance, support may not be easily accessible', S&P warned.
Alongside the bleak assessment of the financial strength of Guardian, S&P also rated as vulnerable National Provident Institution, Prolific Life and Pensions and Windsor Life Assurance.
The S&P assessment brought a fierce reaction from the life industry. NPI said it 'totally disagreed' and its actuary was preparing a detailed response. In addition, NPI has pulled out of a proposed merger with Clerical Medical - a deal which S&P says could strengthen their combined capital and market position.
Guardian Royal Exchange said the S&P report showed no more than earlier surveys on financial strength.
S&P defines a vulnerable insurer as one that 'appears to have vulnerable financial strength, and may be highly exposed to adverse economic or underwriting conditions'.
Guardian Assurance's free assets were boosted by the inclusion of pounds 188m of future profits, S&P said, but without this the ratio of assets to the required solvency margin was only 129.7 per cent.
This was 'barely adequate' to support current levels of business. Steps were being taken to reduce strains, but historic bonus levels looked unsustainable over the long term. The firm would benefit from greater discipline over its expenses, which were high.
Prolific is up for sale by its troubled parent Hafnia with Scottish Provident a potential purchaser.
Windsor, owned by New York Life, is being merged with Gresham, but the benefits will not appear until an expensive integration process is finished, S&P said.Reuse content