Recognising that IAG’s losses will come from investment markets rather than a weakness in its core operating earnings, S&P’s Director of Financial Services Ratings Michael Vine said the agency will show “some tolerance” for the expected bottom-line loss.

“We acknowledge the initiatives already in place to reduce exposure to future equity market volatility, along with continued improvements in the underlying core business performance of the group,” he said.

No matter how nicely S&P’s puts the case however, IAG is unlikely to be happy about it. The ratings agency caused controversy just over a week ago when it cut AMP’s UK life operations from AA to AA-.

Despite the significant loss IAG has warned it will face, CEO Michael Hawker says IAG’s overall market performance remains strong.

Mr Hawker said IAG will have to manage the cycle “prudently” and remain well managed and capitalised in order to meet claims.