Suncorp Group Limited has faced credit rating downgrades from both S&P Global Ratings and Fitch Ratings, as its capital and business structure undergo significant changes following recent divestitures.
The company’s outlook remains stable, reflecting confidence in its core property and casualty (P/C) insurance operations despite the changes.
S&P Global Ratings lowered Suncorp’s long-term issuer credit rating to “A” from “A+,” citing a narrower business profile after the sale of its banking division and the pending divestment of its New Zealand-based life insurer, Asteron Life Limited.
The ratings on Suncorp’s core insurance subsidiaries were affirmed at “AA-,” with S&P emphasising the group’s continued strength in non-life insurance.
Suncorp plans to distribute $4.1 billion in capital proceeds from the banking sale to shareholders by mid-2025, with further capital either reinvested in its insurance operations or returned to shareholders.
S&P also adjusted the gap between the ratings of the holding company and its core subsidiaries from one notch to two, aligning with industry norms for non-operating holding companies.
The group’s P/C division remains a significant contributor, with Suncorp reporting $1.078 billion in after-tax profit from this segment for FY24.
S&P projects modest growth in earnings over the next three years, supported by rate increases in the insurance market, though investment income may face challenges.
Last month, Fitch Ratings downgraded Suncorp’s long-term issuer default rating (IDR) to “A” from “A+” and reduced the insurer financial strength (IFS) rating of AAI Limited, its primary non-life insurance subsidiary, to “A+” from “AA-.”
Like S&P, Fitch cited changes in Suncorp’s capital position following the banking unit sale, which led to a lower assessment under its capital adequacy model.
The downgrade reflects increased retained risks due to changes in Suncorp’s reinsurance structure, which Fitch noted could add volatility in a catastrophe-prone market.
Despite these challenges, Fitch acknowledged the group’s strong performance metrics, including a combined ratio of 92.7% in FY24, an improvement from 93.4% the prior year.
Suncorp’s net profit after tax grew to $1.23 billion in FY24, compared to $1.08 billion in FY23. The insurer attributed this growth to higher premiums, offsetting increased claims costs, and inflationary pressures.
Fitch also announced it would withdraw all remaining ratings for Suncorp and AAI Limited, citing commercial reasons for ending its coverage.
