Suncorp rating outlook revision sparks concern
Investor concern has heightened as Suncorp’s rating outlook has been downgraded amid a rapid dive in the company’s share value.
Credit ratings agency Standard and Poor’s (S&P) has revised Suncorp’s rating outlook from positive to stable, reflecting continuing financial market disruption, which has lessened the likelihood of a rating upgrade. This is despite affirmation of the insurer’s A+ rating.
S&P credit analyst Mark Legge says financial market distress has reduced the chances that Suncorp’s earnings will rebound enough in the short term to warrant a rating upgrade.
“In particular, the weak global debt and equity markets may challenge the extent of profit growth of the group’s wealth management business and returns on its insurance technical reserves and shareholder funds,” Mr Legge said.
Rumours also abound about Suncorp’s exposure to property and whether the company has adequate provisions against it, with its exposure to troubled Queensland property group Raptis Group estimated to be more than $100 million.
In a statement to the Australian Securities Exchange, Suncorp says S&P has recognised that its banking and underlying insurance businesses continue to perform solidly and that Suncorp management continues to respond prudently to difficult financial conditions.
The stable outlook reflects an expectation that Suncorp’s success in integrating Promina will continue, and earnings will improve as weather volatility settles down.
With news of the outlook revision last Thursday, Suncorp’s shares slid a further 51 cents to $8.35. They reached a low during the day of $7.15 before a late rally.
Credit ratings agency Standard and Poor’s (S&P) has revised Suncorp’s rating outlook from positive to stable, reflecting continuing financial market disruption, which has lessened the likelihood of a rating upgrade. This is despite affirmation of the insurer’s A+ rating.
S&P credit analyst Mark Legge says financial market distress has reduced the chances that Suncorp’s earnings will rebound enough in the short term to warrant a rating upgrade.
“In particular, the weak global debt and equity markets may challenge the extent of profit growth of the group’s wealth management business and returns on its insurance technical reserves and shareholder funds,” Mr Legge said.
Rumours also abound about Suncorp’s exposure to property and whether the company has adequate provisions against it, with its exposure to troubled Queensland property group Raptis Group estimated to be more than $100 million.
In a statement to the Australian Securities Exchange, Suncorp says S&P has recognised that its banking and underlying insurance businesses continue to perform solidly and that Suncorp management continues to respond prudently to difficult financial conditions.
The stable outlook reflects an expectation that Suncorp’s success in integrating Promina will continue, and earnings will improve as weather volatility settles down.
With news of the outlook revision last Thursday, Suncorp’s shares slid a further 51 cents to $8.35. They reached a low during the day of $7.15 before a late rally.