S&P also affirmed the composite insurer’s ‘BBB+’ financial strength rating

Mutual insurer LV= has had its ratings outlook upgraded to ‘positive’ from ‘stable’ by ratings agency Standard & Poor’s (S&P).

The ratings agency also affirmed the insurer’s ‘BBB+’ long-term counterparty credit and insurer financial strength ratings on its entities and its ‘BBB-’ long-term issue rating on LV’s subordinated debt issue.

S&P said the outlook revision reflected the group’s “substantially improved capital position over 2013” and expectation that earnings over 2013-2015 will be stronger than previously forecast.

“LVFS’ issuance of £350m of hybrid debt in May 2013 significantly enhanced the group’s capital adequacy,” S&P said in a statement. “We previously anticipated that this fresh capital would be used to support the growth of the life and non-life businesses. However, contrary to our expectations, premiums have been fairly flat. Non-life gross premiums written were £1.45bn in 2013 and £1.49bn in 2012.

“We regard the slowing in premium growth as prudent, especially in non-life, where rates in LVFS’ dominant motor line have softened over the year. We now anticipate that premiums will grow more slowly until 2015 when we estimate that gross non-life premium will be £1.6bn and life APE will be £195m. This level of growth would reduce the pressure on LVFS’ capital base.”

The group will also have benefitted from favourable investment conditions over 2013, S&P said.