Standard & Poor's has lowered its long-term counterparty credit rating on Sweden-based Skandia Insurance to triple 'B' from triple 'B'-plus.

In the same move, the ratings agency revised the CreditWatch implications for the ratings on Skandia to positive from negative.

The downgrade of Skandia was in response to the effects of weak equity markets on Skandia's revenues. Standard & Poor's credit analyst Mark Button said: "The sustained decline in global equity markets is beyond the range of expectations factored into the previous ratings, thereby exposing the effect on group earnings of lower assets under management."

While S&P was optimistic about the insurer's immediate prospects, S&P warned Skandia it needs to address the earnings shortfall. Button added: "Standard & Poor's expects Skandia to continue managing its expenses in line with sales patterns.

"Following receipt of all necessary approvals, Standard & Poor's would expect the long-term counterparty credit rating on Skandia to be raised to single-'A'. Failure to deliver on these expense management initiatives could result in the ratings being lowered."

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