AMP’s life insurance credit rating has been downgraded from AA- to A+ as a result of the misconduct issues brought to light by the Australian Royal Commission.
Ratings agency Standard & Poor’s said the downgrade “reflects a deterioration in the creditworthiness of the entire AMP group as a result of the fallout from the Royal Commission revelations,” and stated that the group’s competitiveness and standing in the market had weakened as a result of its crumbling reputation.
The insurer revealed in July that it would take approximately A$290 million to compensate its customers for poor advice provided since July 2018, and its first-half underlying profit for the year recorded a A$43 million drop.
“Recently announced remediation actions costing the group in excess of A$400 million in fiscal 2018 have undermined the group’s earnings and there are indications that asset management flows have also suffered,” S&P stated.
“The negative outlook reflects the potential for further rating pressure related to the group’s capitalisation as a result of potential penalties, fines, legal action, or further remediation action.”
S&P says AMP’s ratings may be further lowered over the next two years if its capital position weakens, or if its competitive position worsens. A return to a stable outlook may be possible if the insurer “reflects evidence that remediation efforts have improved risk management while the group maintains its robust capitalisation and strong competitive position.”
AMP New Zealand managing director Blair Vernon said the announcement was not unexpected, but that AMP NZ will continue to distance the group’s New Zealand business from its Australian counterpart.
