articles Ratings /ratings/en/research/articles/220719-research-update-suncorp-group-ltd-outlook-revised-to-negative-a-rating-affirmed-core-entities-affirmed-at-12445513 content esgSubNav
In This List
RESUPD

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

COMMENTS

Savings Gain Greater Allure For U.K. Insurers

COMMENTS

Is The Global Reinsurance Sector About To Turn A Corner?

RESUPD

Research Update: QBE Lenders' Mortgage Insurance 'A' Ratings Affirmed, Outlook Stable

COMMENTS

After Bermudian Re/insurers' Half Decade Of Underperformance, Are Better Days Ahead?


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

Overview

  • 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.

Rationale

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.

Outlook

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
IICRA Low Low
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/--

S&P Global Ratings Australia Pty Ltd holds Australian financial services license number 337565 under the Corporations Act 2001. S&P Global Ratings' credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale client (as defined in Chapter 7 of the Corporations Act).

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.

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

No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.


Register with S&P Global Ratings

Register now to access exclusive content, events, tools, and more.

Go Back