AMP’s Shares Fall Precipitously but little impact on Credit Worthiness

AMP’s shares fell by over 25% in one day during October as the company announced the sale of its Life Insurance business and also outflows of $1.5 billion from its funds under management for the quarter.  The outflow of funds was not unexpected given the terrible publicity AMP has suffered as a result of the Hayne royal commission which exposed many poor practices at the organisation.  The share price fell from over $5.50 in February of this year to $2.32 towards the end of October, but have recovered marginally to $2.60 as at the time of writing.

However, most investors are exposed to AMP Bank which is a separate stand-alone entity and while the bank does benefit from support from the parent organisation it is debatable whether the life insurance business enhanced or reduced the group’s credit-worthiness given the potential for catastrophic losses that seem to occur infrequently but regularly within the insurance industry.  S&P downgraded AMP’s life insurance business from AA- to A+ at the end of August and put AMP Bank on negative outlook, but so far S&P has not reacted to the latest events.

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