There seems to be no end in sight for the challenges facing Australian wealth manager AMP after the fallout of the royal commission, which accused AMP of improperly charging fees and attempting to deceive regulators, left the company in dire straits.
Now, S&P Global has downgraded the credit worthiness of AMP and its subsidiaries by one notch to BBB+ after the company revealed plans to sell its life insurance unit to Britain’s Resolution Life earlier in August.
The wealth giant has tried to right the sinking ship, by raising $650 million to fund the restructuring of its wealth management business when it reported its biggest half-year loss as a listed company. Nonetheless, S&P said it had lowered AMP’s group rating because the sale of the insurance unit means AMP’s earnings will rely on its troubled wealth and investment management operations, according to Reuters, as well as its small domestic banking unit.
“The downgrade of AMP Ltd reflects our view of its weakened group credit profile, with lower expected diversification with the pending divestment of AMP Life Ltd and the reliance on lower-rated operating subsidiaries,” stated the ratings agency.
S&P added that AMP’s credit outlook was negative, while sounding the alarm that its rating could be lowered even further – by up to two more notches – following the completion of the life insurance divestment.
“The negative outlook ... also reflects the potential for further pressures related to the AMP group’s capitalisation from possible further remediation action, legal action, and risk associated with implementing new strategy,” commented S&P.
