S&P downgrades AMP Life credit rating
S&P Global has downgraded its rating on AMP Life, a unit of wealth manager AMP, by one notch to 'A+, in the latest fallout from the banking royal commission.
S&P maintained its 'A" rating on the AMP holding company but now has a negative outlook due to the risks of further remediation payments, potential penalties, fines and legal action.
AMP has been hit hard by the quasi-judicial inquiry into Australia's finance sector, losing its CEO, half its board and nearly $4 billion in market value.
Among other things, the inquiry revealed AMP had charged customers fees for no service and then worked at board level to deceive a regulator about the practice.
"The lowering of the rating on AMP Life reflects a deterioration in the creditworthiness of the entire AMP group as a result of fallout from the Royal Commission revelations," S&P said in a statement.
AMP, which is due to re-appear at the year-long public inquiry next month, is also defending a record number of class actions for allegedly failing to disclose its governance problems.
"We believe the AMP group's competitiveness has weakened as a result of the damage to its brand and reputation," the agency said.
Remediation costs had undermined earnings and asset management flows were also being affected, it added.
"The lower rating on AMP Life also factors in risk controls within the insurer's enterprise risk management that are weaker than our expectations," it said.
AMP said last week it had hired a veteran Credit Suisse Group banker as its new CEO, tasking him with using his experience of handling regulatory crises to mend a reputation battered by misconduct.
"While the group has announced material investments to enhance its risk controls and compliance systems, any improvement would take some time," S&P said.
By 1156 AEST, AMP shares were down 1.3 per cent to $3.35.
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