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07 Aug 2003
MOODY'S DOWNGRADES RATINGS OF AMP GROUP (SENIOR DEBT TO Baa1 FROM A3); NEGATIVE OUTLOOK
London, 07 August 2003 -- Moody's today downgraded the ratings of the AMP Group. Senior
debt guaranteed by AMP Group Holdings is downgraded to Baa1 from A3,
and subordinated debt to Baa2 from Baa1. The Reset Preference Shares
issued by AMP Henderson Global Investors are downgraded to Baa3 from Baa2.
AMP Life Ltd's insurance financial strength rating is downgraded
to A1 from Aa3. Commercial paper issued by AMP Group Finance Services
Ltd and AMP (UK) Finance Services plc is confirmed at P-2,
stable outlook. Ratings on AMP Bank were also downgraded by one
notch to Baa1 senior / Baa2 subordinated. AMP Bank's financial
strength rating was confirmed at D, and commercial paper was confirmed
at P-2, stable outlook. Ratings on UK entities of
the Group were also downgraded, with insurance financial strength
at National Provident Life and Pearl Assurance plc downgraded to Baa3
from Baa1, and subordinated debt at NPI Finance plc downgraded to
Ba3 from Baa3. Negative outlooks apply to all long-term
ratings. The ratings on GIO Finance Ltd have been withdrawn as
the programmes are no longer active
The downgrades conclude the review initiated in May 2003 on announcement
of the intention of the AMP group to demerge its UK and Australian businesses
into two separate entities. AMP has completed its equity-raising
plan, with A$1.75 billion of new equity raised through
a combination of underwritten wholesale and retail share issues.
The new equity is to be predominantly used to pay down intra-group
and external debt, and Moody's expects a substantial portion
of debt to be repaid in this way by end 2003. In addition,
AMP has indicated that it expects to also use proceeds from other non-core
asset sales to further reduce debt levels. Consequently,
debt levels at new AMP will be substantially lower, in A$
terms, than previously.
However, in Moody's view, the reduced level of shareholder
equity -- after asset writedowns and the indicative split of capital
between the two new entities-- means that Moody's currently
expects overall leverage at AMP to be higher than previously. More
positively, Moody's notes that earnings generation from the
new AMP Group is likely to be less volatile than historically seen,
due to the Group's earnings being generated predominantly from the
relatively stable Australian life and superannuation business (AMP Life).
However, on balance Moody's views the leverage profile and
debt service ability of the Group as likely to be more commensurate with
the high Baa senior debt rating category. Commenting on the rating
change for AMP Life (IFSR to A1 from Aa3), Moody's noted that
part of the demerger process is likely to see the removal of intra-group
capital supports from AMP Life to other Group entities, improving
the quality of capital at AMP Life. Moody's also recognises
positively recent actions aimed at de-risking the capital base
of AMP Life. However, Moody's downgrade for AMP Life
reflects the leverage issues above and the necessity for AMP Life --
as the main operating entity of the new AMP Group -- to support the
In terms of the rated UK entities, the rating agency added that
the two-notch reduction for insurance financial strength ratings
at National Provident Life and Pearl Assurance plc (to Baa3 from Baa1)
reflect the likely long-term low level of capitalisation that the
funds will have in run-off. Moody's notes positively
recent actions to de-risk the asset allocation of these funds,
leading to a higher likelihood of maintenance of solvency and successful
run-off. However Moody's rating also addresses the
likely level of future benefit creation for policyholders which --
given the relatively low capitalisation and low-risk/return asset
strategy -- is likely in Moody's view to be at lower levels
than in the past. Moody's downgrade for the subordinated
debt at NPI Finance plc reflects these concerns, along with a widening
of notching between policyholder and subordinated debt to reflect widening
rates of severity of loss between policyholders and debtholders at lower
Moody's added that the negative outlook for the Group's long-term
ratings reflects the uncertainty surrounding the completion of the sale
process for certain non-core assets and the application of such
proceeds to reduce debt levels, as well as the remaining transaction
risk in successfully completing the demerger process.
AMP Group, headquartered in Sydney, Australia, had total
assets of A$158 billion as at end 2002.
The following ratings were downgraded with a negative outlook
AMP Life Ltd Insurance financial strength to A1 from Aa3
AMP Group Holdings Ltd Senior debt to Baa1 from A3
AMP (UK) Finance Services plc Senior debt to Baa1 from A3
AMP Group Finance Services ltd Senior debt to Baa1 from A3; subordinated
debt to Baa2 from Baa1
AMP Henderson Global Investors Ltd Preferred stock to Baa3 from Baa2
AMP Bank Ltd Long-term deposit rating to Baa1 from A3
Long-term senior debt to Baa1 from A3
Long-term subordinated debt to Baa2 from Baa1
Long-term junior subordinated debt to Baa2 from Baa1
National Provident Life Insurance financial strength to Baa3 from Baa1
Pearl Assurance plc Insurance financial strength to Baa3 from Baa1
NPI Finance plc Subordinated debt to Ba3 from Baa3
The following ratings were confirmed with a stable outlook
AMP (UK) Finance Services plc P-2 commercial paper
AMP Group Finance Services Ltd P-2 commercial paper
AMP Bank Ltd P-2 commercial paper
D bank financial strength
The following rating was downgraded and withdrawn
GIO Finance Ltd Senior debt to Ba1 from Baa3
The following rating was confirmed and withdrawn
GIO Finance Ltd P-2 commercial paper
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
No Related Data.
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