Life business helps two giants out of trouble

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Tower and AMP’s climb back from the financial doldrums has been confirmed by international credit rating agency Standard and Poor’s.

Friday, July 9th 2004, 6:19AM

Both firms have been given a cleaner bill of health than a year ago and much of the credit attributed to the life sides of the businesses.

AMP Life is now rated 'A+/Positive', while both AMP Group Holdings is rated 'BBB+/Positive/A-2'. The outlook has been changed from stable to positive.

Tower, which is rated 'BB+/B’, and its key operating and holding subsidiaries, including the 'BBB+' financial strength and counterparty credit ratings on Tower Australia and Tower Life New Zealand, has had its outlook changed to stable from negative.

S&P says AMP’s upgrade reflects the improved financial structure and quality of capital of the AMP group following the demerger of its poorly performing UK operations and material reduction in debt and hybrid securities. It expects under AMP's refocused strategic model, new business levels and reported profitability will improve throughout 2004.

S&P’s financial services ratings credit analyst Kate Thomson says AMP's strength is underpinned by its subsidiary AMP Life, whose competitive position, capitalisation, and earnings remain solid.

“AMP's extensive distribution network and high profile brand in Australia and New Zealand should underpin the group's earnings, and support its financial strength.”

S&P’s credit analyst Carolyn Rajaratnam says Tower's outlook change reflects the return to profitability in the past two halves and the steady progress on rebuilding Tower Australia through a much-reduced expense base, growth in new business volumes, and a reduction in lapses.

“The ratings on Tower's subsidiaries reflect the moderate business profile of Tower Australia and the group's modest, although improving, earnings, which are partially offset by the group's adequate capitalisation, strong position in the New Zealand non-life sector, good market positions in life and health insurance in both countries, and now a lower leverage position,” Rajaratnam says.

Meanwhile, the New Zealand and Australian wealth management operations continue to perform well.

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