Aegon UK sees S&P rating cut

CREDIT ratings agency Standard & Poor's has downgraded Edinburgh-based life and pensions company Aegon UK after the company revealed that it was scaling back its operations.

The agency has moved the Scottish Equitable owner from AA- to A+ because of the continued weakness in earnings performance. It said the company now depended on the success of the restructuring plan announced in June which will slash costs in its life and pensions business and lead to the loss of up to 600 jobs.

S&P said the plan carried "execution risk in delivering the 25 per cent reduction in costs while maintaining the strength of its franchise during a period of significant managerial, strategic and operational change". It said the improvement in earnings will emerge slowly.

Aegon will focus on selling products to those about to retire and to younger workers whose investment plans have been affected by gyrations in the stock market.

Aegon UK chief executive Otto Thoresen said he accepted the downgrade which puts it on a par with Standard Life. "S&P is saying our earnings are not good enough and our return on capital is not good enough. It is confirming what we knew," he said.