More weakness for AMP shares yesterday after ratings group, S&P Global downgraded its rating on AMP Life, one notch to A+, in the latest fallout from the banking royal commission.
While S&P maintained its ‘A” rating on the AMP holding company (which owns AMP Life) the company now has a negative outlook due to the risks of further remediation payments, potential penalties, fines and legal action, according to the ratings statement.
The shares dipped 0.6% to $3.38.
AMP’s reputation and business has been damaged by the banking royal commission losing its CEO, half its board (including its chair) other executives and close to $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 ASIC, the corporate 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 is due to re-appear at the year-long public inquiry next month when hearings on insurance start (life and general), is also defending at least four class actions for allegedly failing to disclose its governance problems. These class actions might very well be combined into one suit in the NSW Supreme Court after being filed in the Federal Court.
“We believe the AMP group’s competitiveness has weakened as a result of the damage to its brand and reputation,” S&P said in its statement yesterday.
Remediation costs had undermined earnings and asset management flows were also being affected, S&P 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 Francesco de Ferrari, a veteran Credit Suisse Group banker as its new CEO. He starts what will be a tough gig repairing AMP’s damaged image on December 1. Central will be trying to stabilise management and revamp internal processes and practices that meet what every the recommendations that emerge from the royal commission and what regulators like ASIC demand (belatedly).
Veteran banker, David Murray has been installed as the company’s chairman. he replaces Catherine Brenner. “While the group has announced material investments to enhance its risk controls and compliance systems, any improvement would take some time,” S&P said.
