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Announcement:

Moody's Disclosures on Credit Ratings of AMP Group Holdings Limited

Global Credit Research - 13 Mar 2012

Sydney, March 13, 2012 -- The following release represents Moody's Investors Service's summary credit opinion on AMP Group Holdings Limited and includes certain regulatory disclosures regarding its ratings. This release does not constitute any change in Moody's ratings or rating rationale for AMP Group Holdings Limited and its affiliates.

Moody's current ratings on AMP Group Holdings Limited and its affiliates are:

Senior Unsecured MTN Program (foreign currency) ratings of (P)A2

AMP Group Finance Services Limited

BACKED Senior Unsecured (domestic currency) ratings of A2

BACKED Senior Unsecured MTN Program (foreign currency) ratings of (P)A2

BACKED Subordinate (domestic and foreign currency) ratings of A3

BACKED Subordinate MTN Program (foreign currency) ratings of (P)A3

BACKED Commercial Paper (foreign currency) ratings of P-1

BACKED Other Short Term (foreign currency) ratings of (P)P-1

RATINGS RATIONALE

AMP Group Holdings Ltd (AMP Group) A2 senior debt ratings are underpinned by AMP Life Ltd's ( AMPL) Aa2 insurance financial strength ratings ( IFSR) and continue to reflect its strong franchise name in Australia's growing superannuation (retirement savings) market, established wealth management and protection business, sound financial fundamentals and experienced management team. These various strengths continue to reinforce its market share, capitalization and financial flexibility.

AMP Group's franchise was greatly enhanced by its March 2011 merger with the Australian and New Zealand businesses of wealth manager, AXA Asia Pacific Holdings (AXA). This increased its assets under management by 38% to AUD159bn and almost doubled its financial planner/advisor network to 4,050.

AMP's Group operating entities comprising of its life insurance, wealth management, protection, banking and asset management businesses have established unique advantages over its peers. Its command of one of the largest networks of financial planners in Australia and New Zealand and access to multiple fund platforms have enable it to compete effectively in the dynamic Australian market and increase its market share in the superannuation, retirement income and risk insurance sectors.

In addition, its financial planners are amongst some of the most experienced with an agency turnover rate below the market average. The productivity levels of its financial planners, as measured in terms of funds under management per planner, are comparable to those of its major competitors.

AMPL, the life insurance unit which contributes most of the group's earnings has improved its already strong capitalization level by reducing investment volatility and raising additional capital to offset the decline in investment values experienced since the onset of the global financial crisis in 2008. As a result of the capital initiatives it is still maintaining its internal capital adequacy benchmarks for solvency and capital adequacy. It has also actively reduced its exposure to equities and taken out additional protection to hedge against further adverse movements in equities and interest rates.

In 1H11, AMPLachieved an underlying profit of AUD455m (1H10: AUD383m) including a three-month contribution of AUD61m from AXA, giving it an underlying return on equity of 18,1%. Net profit, however, declined to AUD349m (1H10: AUD425m) due to transaction, integration, and goodwill amortization costs associated with the AXA merger. Such costs will be considerably lower going forward (beyond the initial integration period), as well as considerably outweighed by AXA's contribution and the substantial synergistic benefits that are expected to accrue from the merger.

As a counter to the slowdown in the wealth management sector, AMPL's increased focus on risk products has produced growth in a very challenging environment. In terms of the existing business, AMPL persistency levels have remained stable - its overall persistency was just on 90%, in line with 1H10. AMP management has been able to lower controllable costs beyond the 3% target (set in 2009) as an offset against the anticipated decline in revenue from asset management.

AMPCI, AMP's asset management business, experienced an improvement in fee income after a decline in 2009 amidst ongoing difficult market and economic conditions. However, the increase in revenue was more than offset by a higher controllable costs.

Rating Outlook

The stable outlook reflects Moody's expectations that AMPL will maintain its leading market position as one of largest and most reputable life insurance and wealth management companies in Australia. The outlook also reflects its strong capital base and financial flexibility.

What Could Change the Rating - Up

- Maintain strong and profitable market position in the life and wealth management business

- Consistent improvement in financial leverage ratio to less than 20%

- Improvement in its capital adequacy in terms of its excess capital above its target surplus and the required regulatory capital

What Could Change the Rating - Down

- Significant drop in profitability with 5-year average ROE dropping below 13%

- Increase in debt with financial leverage rising beyond 40%

- Material drop in capitalization due to significant fall in coverage ratio for its APRA-determined capital adequacy position or the emergence of a severely uncovered position for its target surplus level

- Intensive competitive pressures, leading to serious reductions in net fund flows

The methodologies used in these ratings were Bank Financial Strength Ratings: Global Methodology published in February 2007 and Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology published in March 2007. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

The following Global Scale Credit Ratings are EU endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare each of the ratings are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics information.

Moody's considers the quality of information available on the rated entities, obligations or credits satisfactory for the purposes of issuing these ratings.

Moody's adopts all necessary measures so that the information it uses in assigning the ratings is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Peter Tebbutt
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Pty. Ltd.
Level 10
1 O'Connell Street
Sydney NSW 2000
Australia
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100

Stephen Long
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Releasing Office:
Moody's Investors Service Pty. Ltd.
Level 10
1 O'Connell Street
Sydney NSW 2000
Australia
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100

Moody's Disclosures on Credit Ratings of AMP Group Holdings Limited
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

 


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MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

 


For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for retail clients to make any investment decision based on MOODY'S credit rating. If in doubt you should contact your financial or other professional adviser.
© 2013 Moody's Investors Service, Inc., Moody’s Analytics, Inc. and/or their affiliates and licensors. All rights reserved.
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