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S&P Global Ratings has downgraded its ratings on wealth giant AMP from “A” to “A-”, as well as on the group’s operating subsidiaries by one notch. The group’s associated debt has also been lowered by one notch.
All ratings were placed on CreditWatch with negative implications.
“The downgrade reflects the weakened stand-alone credit strengths of AMP Life Ltd. and the support it provides to the group credit profile,” S&P said. “The CreditWatch placement on the group reflects our view of uncertainty regarding the future credit quality of AMP after AMP Life is divested to Resolution Life Australia Ltd. (unrated).”
The ratings agency noted that with the divestment of AMP’s life insurance business, which is set to be completed by the end of the third quarter of 2019, will likely lower AMP’s group credit profile by one or more notches than the current level. The AMP bank, though well capitalised, “is unlikely to bolster group creditworthiness,” given its modest contribution to the group’s earnings and stand-alone credit.
“Post-sale, the group credit profile will take into account the lesser earnings diversification and greater reliance on a lower-rated bank,” S&P said. “The CreditWatch placement of AMP Life reflects our uncertainty regarding future support, or negative intervention, from its new owner, now that completion of the sale is more certain.”
The ratings on AMP Life will continue to be driven by its stand-alone credit profile before and after the sale and be influenced by linkages with its new parent, Resolution Life (unrated).
The ratings on AMP Life and the rated entities in the AMP group will continue to face downward pressure from the residual impact of misconduct investigations and ongoing remediation activities.
“While we view that brand and reputational pressure is subsiding, asset management flows are likely to continue to be affected during 2019 and risks are still associated with the core aligned advisor network,” S&P said.
The ratings agency plans to resolve the CreditWatch on the group following further review of the
credit strength of the remaining asset and wealth management and banking businesses. The CreditWatch on AMP Life will be resolved after greater clarity of the extent of group support from Resolution Life and the strategic and financial construct post-sale.
