S&P Affirms AMP Subsidiary Ratings, Ups Outlook

June 29, 2004

Standard & Poor’s Ratings Services announced that it has revised the ratings outlook on Australia’s AMP Life Ltd., AMP Group Holdings Ltd., and AMP Bank Ltd. to positive from stable, and affirmed the insurer financial strength and counterparty credit ratings on these companies.

S&P said, “AMP Life is now rated ‘A+/Positive’, while both AMP Group Holdings and AMP Bank are rated ‘BBB+/Positive/A-2’.” The rating agency explained the outlook revision to positive as reflecting “the improved financial structure and quality of capital of the AMP Ltd. group (AMP; not rated) following the demerger of its poorly performing U.K. operations, and material reduction in debt and hybrid securities.”

S&P said it “expects that under more supportive operational conditions—following the completion of the demerger in 2003—and AMP’s refocused strategic model, new business levels and reported profitability will improve throughout 2004. AMP’s strength is underpinned by its subsidiary AMP Life, whose competitive position, capitalization, and earnings remain solid.”

The bulletin described the overall group capitalization as “strong,” and the group’s competitive position as remaining “robust despite AMP’s difficult year in 2003.” S&P noted that “AMP’s on-balance-sheet liquidity will remain adequate after the use of internal resources to pay down external debt, and is supplemented by external standby facilities.”

It also described the AMP group’s recent performance as “very poor,” dragged down by its now demerged U.K. subsidiaries, as well as a legacy of a costly and complex strategic model.”

“Key to any change in the ratings on AMP’s subsidiaries, therefore, will be evidence of a consistent and successful strategy, and sustained earnings performance for the group as a whole,” stated S&P credit analyst, Kate Thomson, Financial Services Ratings. “AMP’s subsidiaries could migrate to a higher credit standing, but this will depend on AMP demonstrating a sustainable, adequate level of earnings, a dynamic competitive position and business flows, a strong capital position, and low gearing levels.”

She added that “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.”

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