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Research Update: Suncorp Group Ltd. Outlook Revised To Negative; 'A+' Rating Affirmed; Core Entities Affirmed At 'AA-'; Outlook Stable


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Research Update: Suncorp Group Ltd. Outlook Revised To Negative; 'A+' Rating Affirmed; Core Entities Affirmed At 'AA-'; Outlook Stable


  • On July 18, 2022, Suncorp Group Ltd. (Suncorp) announced that it is selling its banking operations, Suncorp-Metway Ltd. (SML), to Australia and New Zealand Banking Group Ltd. (ANZ).
  • Following completion of the sale, Suncorp's diversity of cash flows will reduce. We may therefore widen the notching between the group's operating companies and the nonoperating holding company to two from one now.
  • We are revising our rating outlook on Suncorp, the group's nonoperating holding company, to negative from stable. We are affirming our 'A+' long-term issuer credit rating on Suncorp.
  • At the same time, we are affirming the 'AA-' ratings on Suncorp's core operating subsidiaries because we do not expect the sale to affect the group's credit strengths. The outlook on the operating companies remains stable.

Rating Action

On July 19, 2022, S&P Global Ratings revised its rating outlook on Suncorp Group Ltd. to negative from stable. At the same time, we affirmed our 'A+' long-term issuer credit rating on the Australia-based company.

We also affirmed our 'AA-' long-term issuer credit and financial strength ratings on Suncorp's core operating entities with a stable outlook.


The outlook revision on Suncorp reflects the likelihood that we will downgrade the nonoperating holding company by one notch after the completion of the sale of SML to ANZ (AA-/Stable/A-1+). We may widen the notching between the operating companies and nonoperating holding company to reflect a reduction in the earnings diversity the banking operations provide to the nonoperating holding company.

We currently rate Suncorp one notch below the group credit profile, rather than the standard two notches lower. This reflects the nonoperating holding company's access to diverse cash flows across the group and, to a lesser extent, its holding of surplus capital, which collectively support its debt-servicing capability.

We do not expect the sale of SML to impact the ratings on Suncorp's core operating subsidiaries because we view SML's weaker stand-alone credit profile as an offset to the earnings diversity it provides.

If we downgrade Suncorp by one notch, we would also downgrade any instruments issued by the nonoperating holding company by one notch.

As a result of the announced sale of SML, we consider the strength of Suncorp's commitment to SML has weakened somewhat. As such, we have moderated our assessment of SML's group status to strategically important, from highly strategic.


Suncorp Group Ltd.

The negative outlook on Suncorp Group Ltd. reflects the likelihood that we will lower the ratings by one notch over the next 12 months. This would be due to a widening in the notching between the operating companies and the nonoperating holding company to two notches from one notch before. This action would likely only come following the completion of the sale of SML due to the inherent reduction in earnings diversity at the nonoperating holding company.

Downside scenario

We may lower the rating on Suncorp over the next 12 months if we consider the sale of SML has reduced the group's diversity of operations and no longer supports a narrower notching between the core operating subsidiaries and the nonoperating holding company.

Upside scenario

We may revise the outlook on Suncorp to stable over the next 12 months if: (1) we view the group's earnings post completion of the sale of SML to be sufficiently diverse to maintain a one notch differential; and (2) the nonoperating holding company retains significant levels of excess capital.

We may also revise the outlook to stable if the sale of SML does not proceed.

Suncorp core operating subsidiaries

The stable outlook on Suncorp's core operating subsidiaries reflects our expectation that the group will maintain a very strong business and financial position over the next 12-24 months, underpinned by its sound operating performance and excellent capital adequacy.

Downside scenario

We may lower the ratings on Suncorp's core subsidiaries over the next 12-24 months if:

  • We assess the competitive position of the property/casualty businesses to be weaker, potentially due to a material impact following poor underwriting or risk selection; or
  • We view the group's prospective capital adequacy position has weakened.
Upside scenario

We consider a higher rating on Suncorp as unlikely over the next 12-24 months, recognizing the extent of the inherent business diversification.

Ratings Score Snapshot

To From
Financial strength rating AA- AA-
Anchor aa- aa-
Business risk Very Strong Very Strong
Competitive position Very Strong Very Strong
Financial risk Very Strong Very Strong
Capital and earnings Very Strong Very Strong
Risk exposure Moderately low Moderately low
Funding structure Neutral Neutral
Modifiers 0 0
Governance Neutral Neutral
Liquidity Exceptional Exceptional
Comparable ratings analysis 0 0
Support 0 0
Group support 0 0
Government support 0 0
IICRA--Insurance Industry And Country Risk Assessment.
ESG credit indicators: E-3, S-2, G-2

Related Criteria

Related Research

Ratings List

Ratings Affirmed

Suncorp Group Ltd.

Subordinated A-
Subordinated BBB+
Ratings Affirmed; CreditWatch/Outlook Action
To From

Suncorp Group Ltd.

Issuer Credit Rating A+/Negative/-- A+/Stable/--

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