AMP to Writedown up to $675 Million from U.K. Operations

November 18, 2002

Australia’s beleaguered AMP Ltd. announced that it could writedown as much as A$1.2 billion (U.S.$675 million) in the value of its U.K. operations, chiefly Pearl and NPI, by the end of the year.

The news comes on top of last week’s announcement that the company would cut up to 1200 jobs as part of a restructuring plan introduced by CEO Andrew Mohl, who took over as head of the company last September, when the problems with Pearl became urgent.

Mohl told Queensland’s Courier Mail that, “Previous valuations are no longer appropriate in light of the substantial falls in equity markets since June 2002, difficult operating conditions and the changes in the business arising from the five-point reform agenda.” He added that he didn’t see a recovery in the value of the assets “for some time.”

Standard & Poor’s reacted to the news by placing the insurer financial strength and counterparty credit ratings on AMP Life Ltd. (rated ‘AA-‘), AMP Group Holdings Ltd. (rated ‘A’), AMP Bank Ltd. (rated ‘A’), NPI Ltd. (rated ‘A+’), and related issues “on CreditWatch with negative implications.”

S&P indicated that “The magnitude of these write-downs is outside that contemplated by recent rating actions.” It said it was in the process of assessing “the extent to which the group’s medium-term earnings prospects and capitalization remain congruent with existing ratings.”

Kate Thomson, S&P associate director, Financial Services Ratings, stated that “The ratings on the key operating entities-which had remained on negative outlook after the downgrades of July 30 and Nov. 5, 2002-have been impacted by difficult operating conditions, and are further pressured by today’s announcement. A return to more supportive levels of operating profitability is a key component in the maintenance of the existing ratings for the group.”

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