Moody’s has downgraded AMP Life’s financial strength rating amid deteriorating profitability and increased product risk.

AMP Life recorded an operating loss of $176 million last year, compared with a $110 million profit in 2017.

Claims increases in total and permanent disability and income protection led to $209 million in capitalised losses and $63 million in experience losses. The capitalised losses are beyond Moody’s expectations, and it expects continued pressure to negatively affect profitability.

AMP Life also handed out large dividends recently, leading Moody’s to mark it down for reduced capital adequacy.

The ratings agency’s outlook for AMP remains negative.

AMP recently revealed huge losses, with the group scrambling to stem nearly $4 billion in cash outflows due to reputational damage from the Hayne royal commission. Profit plummeted to just $28 million from $848 million in 2017.

It is prioritising the complex legal separation from its life businesses, the sale of which CEO Francesco De Ferrari says is necessary given the business’ volatility and capital intensity.