Chennai: Momentous changes are happening at AMP, the Australian financial major. AMP is a Sydney-based life insurance and funds management group, with major operations in Australia and the UK. In India, it has a 26:74 life insurance joint venture - AMP Sanmar Life Assurance Company - with the city based Sanmar group.

The Australian group has decided to bifurcate its Australian and UK operations into two different entities, with shareholders holding shares in both the companies listed on the Australian Stock Exchange. The Australian company will be called AMP while the UK entity will likely to be called Henderson. Henderson is likely to be listed on the London Stock Exchange.

What is of immediate interest is AMP's Australian operation. The new business strategy brings AMP back to be a regionally focused wealth management company with strong linkage with its asset management outfit. According to AMP, the company will be well capitalised targeting the Australasian markets.

However, the group has come under the lens of the global rating agency, Standard & Poor's (S&P) Ratings Services. The ratings agency placed on CreditWatch Negative the AA- insurer financial strength and counter-party credit ratings on AMP Life, the Australian operating subsidiary of AMP. S&P at the same time has placed the A- counter-party credit ratings, and related debt ratings, on AMP Group Holdings and AMP Bank on CreditWatch Negative.

The CreditWatch ratings action follows AMP announcement today that the group will sell its equity investments held in its UK operations, and that the group expects a substantial write-down in asset values, a capital raising of A$1.5 billion, and the legal separation of the UK and Australian businesses.

"S&P will assess the extent to which write-downs will weaken the financial strength of the AMP group, and signal lower group earnings going forward," says Kate Thomson, credit analyst, Financial Services Ratings.

"Positive features of the restructuring plan include the influx of fresh capital of up to A$1.5 billion, a reduction in debt improving leverage and interest cover, and reduced equity exposures in the UK. However, these positive factors are balanced by a reduction in capital resources under the substantial write-downs announced, and some diminution in UK operations in a difficult market environment," adds Thomson.

The rating agency believes that should the ratings on AMP Life, AMP Group Holdings and AMP Bank be lowered, they would unlikely be lowered below A+ for AMP Life and BBB+ for AMP Group Holdings and AMP Bank.

The ratings for Pearl Assurance PLC (rated BBB+), NPI (rated A), and National Provident Life (rated BBB+) will likely be in the BBB range. S&P expects to resolve the CreditWatch shortly as more detailed information becomes available.