AMP Group And AMP Bank Downgraded By S&P

AMP Limited

AMP Limited (ASX: AMP) is into the business of life insurance, superannuation, asset management products, pensions, retirement planning, and other diversified financial services throughout Australia and New Zealand. The Company services individual customers, small businesses and corporations.

The company’s ratings had been downgraded by the S&P (credit ratings agency), post its decision to divest its stake, in the insurance business in a $3.45 billion deal. The S&P has downgraded the AMP Group and its subsidiaries including AMP bank to A- from A, with a negative outlook. 

AMP Limited (ASX: AMP) is into the business of life insurance, superannuation, asset management products, pensions, retirement planning, and other diversified financial services throughout Australia and New Zealand. The Company services individual customers, small businesses and corporations.

The company’s ratings had been downgraded by the S&P (credit ratings agency), post its decision to divest its stake, in the insurance business in a $3.45 billion deal. The S&P has downgraded the AMP Group and its subsidiaries including AMP bank to A- from A, with a negative outlook.

This downgrade has been done due to lingering concerns on the group’s credit profile, as the same is anticipated to soften after the sale of AMP Life to Resolution Life. And the credit rating agency believes that the situation may get worse going forward, which shall also impact and put pressure on the AMP Bank.

As per the earlier scenario, the AMP bank was pretty much confident that it would receive support from its well-capitalised life insurance operations, if it ever got into trouble. As the life insurance business is being disposed off now, the bank is not supposed to get any support going forward, if in case there is a liquidity concern for the bank.

The spokesperson of the AMP had said, that the firm continues to have a robust balance sheet and better capital position. It is evident from the fact that the Level 3 eligible capital is above the minimum regulatory capital requirements of $1.65 billion at December 31, 2018.

As per an earlier development, Moody’s (rival ratings agency) had downgraded the operations of the AMP life from the earlier A2 to Aa3. Moody’s had downgraded the life insurance business on account of the shocking half-year results, announced to the market, with its life business reported a $286 million-dollar swing from profit to loss. Moody’s said that it never anticipated the capitalisation of such level of losses.

For the FY2018, the AMP’s life business reported an operating loss of $176 million in 2018. The management stated that these losses were incurred, on account of an increase in income protection, and total and permanent disability claims. Hence the agency, has now kept the AMP, and its bank business on a review with a negative stance on both.

Now, let’s have a glance at AMP Limited’s stock performance, and the return it has posted over the past few months. The stock of the company last traded at a price of A$2.350, down by 2.083% from its previous close. It has a market capitalisation of ~$ 7.05 Bn. The stock has provided a YTD return of -1.64%, and posted returns of -28.14%, -2.04% over the past six and three months respectively. However, in the last one-month period it had generated a positive return of 8.60%. It had a 52-week high price of A$5.470 and touched a 52-week low price of A$2.120.

This downgrade has been done due to lingering concerns on the group’s credit profile, as the same is anticipated to soften after the sale of AMP Life to Resolution Life. And the credit rating agency believes that the situation may get worse going forward, which shall also impact and put pressure on the AMP Bank.

As per the earlier scenario, the AMP bank was pretty much confident that it would receive support from its well-capitalised life insurance operations, if it ever got into trouble. As the life insurance business is being disposed off now, the bank is not supposed to get any support going forward, if in case there is a liquidity concern for the bank.

The spokesperson of the AMP had said, that the firm continues to have a robust balance sheet and better capital position. It is evident from the fact that the Level 3 eligible capital is above the minimum regulatory capital requirements of $1.65 billion at December 31, 2018.

As per an earlier development, Moody’s (rival ratings agency) had downgraded the operations of the AMP life from the earlier A2 to Aa3. Moody’s had downgraded the life insurance business on account of the shocking half-year results, announced to the market, with its life business reported a $286 million-dollar swing from profit to loss. Moody’s said that it never anticipated the capitalisation of such level of losses.

For the FY2018, the AMP’s life business reported an operating loss of $176 million in 2018. The management stated that these losses were incurred, on account of an increase in income protection, and total and permanent disability claims. Hence the agency, has now kept the AMP, and its bank business on a review with a negative stance on both.

Now, let’s have a glance at AMP Limited’s stock performance, and the return it has posted over the past few months. The stock of the company last traded at a price of A$2.350, down by 2.083% from its previous close. It has a market capitalisation of ~$ 7.05 Bn. The stock has provided a YTD return of -1.64%, and posted returns of -28.14%, -2.04% over the past six and three months respectively. However, in the last one-month period it had generated a positive return of 8.60%. It had a 52-week high price of A$5.470 and touched a 52-week low price of A$2.120.


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