Dear Friend,

I’ll have to admit that when I stepped into this job I think I had an irrational fear of ratings agencies and the power they weald over our industry.

But the more I thought about it and the more I tried to replicate even a fraction of what they do, I saw what a valuable service they were providing to our business.

I mean they routinely distil thousands of pages of complicated financial information and turn it into simple A or B ratings that even a simpleton like me can understand. In an industry that is based on buying promises written on pieces of paper, the agencies show that some pieces of paper are better than others.

In short – they add value. So these days I’m very loath to criticise or question.

But one question about this Scottish Re business:

Scottish Re’s balance sheet looks just fine —— the assets outweigh the liabilities handsomely — the trouble is all about short-to-medium-term cashflow — those assets are tied up while the company has a few bills to pay pretty soon.

I’m no financial whizzkid, but surely the ratings agencies look at cashflow? And if not why not?

I was just reading one affirmation of Scottish Re when it still had an 'A' rating back in June – no a mention of cashflow problems there. Surely it’s not fair to be talking about cashflow now if only 5 months ago you weren’t talking about at all?

What do you think about this? Click on “comment” at the bottom of this item

I really want you to comment – after all you pay for these ratings.

Use the comment link below to share your thoughts now.