Overview
- On April 4, 2024, Suncorp Group Ltd. announced that it is selling its New Zealand life insurance business, Asteron Life Ltd. (Asteron), to Resolution Life NOHC. The sale remains subject to regulatory and other approvals.
- We are lowering our financial strength and issuer credit ratings on Asteron to 'A+' from 'AA-', reflecting a reduced level of expected extraordinary group support.
- We are also placing our ratings on Asteron on CreditWatch with negative implications, as we believe we will likely lower the ratings further if the sale proceeds. We see a downgrade of one or two notches as the most likely outcome.
- The ratings on Suncorp's core operating entities remain unchanged following the announcement of the sale given that Asteron is not material in the context of the group credit strengths.
Rating Action
On April 9, 2024, S&P Global Ratings lowered its financial strength and issuer credit ratings on Asteron Life Ltd. to 'A+' from 'AA-'. At the same time, we placed the financial strength and issuer credit ratings on Asteron on CreditWatch with negative implications.
Rationale
The downgrade of Asteron reflects our view that the likelihood of extraordinary support from Australia-based Suncorp Group (core operating entities rated AA-/Stable/--) to Asteron has lessened. This follows the April 4, 2024, announcement that Suncorp has agreed to sell Asteron to Resolution Life NOHC Pty Ltd. (unrated). We therefore no longer consider Asteron will receive the same level of extraordinary support as core entities of Suncorp. As a result, we have lowered the group status assessment to strategically important, from core.
Despite the announced sale, we believe Suncorp will likely continue to provide ongoing and extraordinary support to Asteron up until the point of sale. This is because Asteron is part of Suncorp New Zealand, the group's operations in that country. Asteron shares a common regulator with the other entities in Suncorp New Zealand. There also exists a large amount of customer overlap with the retained property/casualty (P/C) businesses. As such, we consider Suncorp could face regulatory and reputational issues were it not to support Asteron.
The placement of the ratings on Asteron on CreditWatch with negative implications reflects our view that we would likely lower the ratings by one or two notches following the completion of the sale to Australia-based Resolution Life NOHC. While we do not have a rating on Resolution Life, we assume it has a weaker credit quality than Suncorp. We do not expect the ratings on Asteron to benefit from the same level of uplift under new ownership.
The sale of Asteron does not impact the ratings on Suncorp's core operating subsidiaries because Asteron is a relatively small part of Suncorp, accounting for less than 5% of its capital and earnings as of fiscal 2023. Suncorp's P/C operations remain the driver of the group credit profile and the ratings on its core subsidiaries.
The issuer and issue ratings on Suncorp's nonoperating holding company, Suncorp Group Ltd., also remain unchanged. These ratings are on CreditWatch with negative implications pending the sale of its banking subsidiary, Suncorp-Metway Ltd.
CreditWatch
The placement of the ratings on Asteron on CreditWatch reflects the likelihood that we will lower the ratings on the insurer once the sale to Resolution Life is complete.
We believe a one or two notch downgrade to be the most likely outcome if the sale proceeds as planned.
There is a lower likelihood scenario that we may affirm the ratings on Asteron at 'A+' if the sale does not proceed.
Related Criteria
- Criteria | Insurance | General: Insurer Risk-Based Capital Adequacy--Methodology And Assumptions, Nov. 15, 2023
- General Criteria: Hybrid Capital: Methodology And Assumptions, March 2, 2022
- General Criteria: Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10, 2021
- Criteria | Insurance | General: Insurers Rating Methodology, July 1, 2019
- General Criteria: Group Rating Methodology, July 1, 2019
- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
Related Research
- Suncorp Group Ltd. 'A+' Rating Placed On CreditWatch Negative; Core Entities Affirmed At 'AA-' With Stable Outlook, April 3, 2024
Ratings List
| Downgraded; CreditWatch/Outlook Action | ||
|---|---|---|
| To | From | |
|
Asteron Life Ltd. |
||
| Issuer Credit Rating | ||
| Local Currency | A+/Watch Neg/-- | AA-/Stable/-- |
| Financial Strength Rating | ||
| Local Currency | A+/Watch Neg/-- | AA-/Stable/-- |
| Ratings Affirmed | ||
|
Suncorp Group Ltd. |
||
| Issuer Credit Rating | A+/Watch Neg/-- | |
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| Primary Credit Analyst: | Julian X Nikakis, Sydney (61) 2-9255-9818; julian.nikakis@spglobal.com |
| Secondary Contact: | Craig A Bennett, Melbourne + 61 3 9631 2197; craig.bennett@spglobal.com |
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