Aviva moves to salve Brexit concerns as S&P slashes UK rating despite market rally

Despite a further 4 per cent fall, to 359p, as trading resumed this morning, the firm said in a trading update that it had carried out extensive research on the possible effect of a Brexit vote, and had concluded it would have “no significant operational impact” on the group.

A spokesman said: “Aviva’s capital position is resilient to market stress, and the company estimates that as of close of the markets on Friday June 24, 2016 its Solvency II coverage ratio remained close to the top of its working range of 150 per cent - 180 per cent.

“As announced on June 24, 2016, Aviva has conducted extensive analysis of the possible implications of a vote to leave the EU and considers it will have no significant operational impact on the company.”

Aviva’s intervention came as pressure did ease on UK financial markets after two days of post-referendum turmoil, with the FTSE 100 share index opening higher.

In morning trading, the index was up 2 per cent at 6,102.01, while the FTSE 250 had gained 2.5 per cent.

The FTSE 100 lost 5.6 per cent in the previous two trading sessions, while the more UK-focused FTSE 250 had slumped 13.7 per cent.

The pound also showed signs of recovery, rising 1 per cent against the dollar to $1.3356.

The pound had risen as high as $1.50 shortly before the result of the vote became clear on Friday morning.

But on Monday, the currency plunged to a 31-year low against the dollar, while some share trading was temporarily halted.

Meanwhile, shares in Royal Bank of Scotland briefly plunged to their lowest level since 2009, after analysts cut ratings on the stock.

In a note Monday, French bank Societe Generale cut its rating on 73 per cent state-owned RBS to Sell from Hold, saying it is worst positioned for life after Brexit.

SocGen said RBS’s “lower level of profitability gives it less scope to absorb bumps in the road”.

RBS shares recovered from midday lows to settle 15 per cent down at 174.3p.

Trading of RBS shares suspended for five minutes as automatic circuit breakers triggered when they dropped more than 8 per cent.

And despite the rallying of markets today, rating agency Standard & Poors said it has removed the UK’s AAA credit rating following the vote for Brexit, with Fitch also cutting its UK rating.

S&P last night downgraded the top rating for the UK, saying that the vote to Brexit could mean “a deterioration of the UK’s economic performance, including its large financial services sector”.

The news is a blow for the UK Government as owner of one of the largest budget deficits of any advanced economy in the world, with public sector net debt excluding banks reaching £1,606.9billion - equivalent to 83.7 per cent of the UK’s economic output, according to the Office for National Statistics (ONS).

The ONS said the UK chancellor borrowed £74.9billion for the financial year ending in March, overshooting the annual target by £2.7billion.