Despite falling profits, the financial institutions that posted results last month have been rated 'credit neutral' by Moody's Investors Service.
The credit-neutral results for the four non-bank financial institutions reviewed came despite three of the four – AMP, Suncorp Group, and QBE Insurance – reporting drops in net profit after tax (NPAT) from the previous reporting period.
These ratings come after the outlook for five of Australia's major banks was revised by Moody's to negative in August, due to expectations that their operating environment was likely to become more difficult in the near future.
Bendigo and Adelaide Bank was the only institution featured in the Moody’s report that did not experience a decline in NPAT; rather, the bank held its profits relatively flat at $439.3 million.
QBE’s NPAT took the biggest hit, down 46 per cent in the first half of 2016, led by a lower material reduction in risk-free rates for discount claims liabilities, which subsequently saw a rise of almost 65 per cent in the net claims ratio, Moody’s noted.
Nonetheless, the research house acknowledged that QBE’s balance sheet was well protected by strong reinsurance cover, helping keep the credit impact neutral.
AMP’s results were deemed credit-neutral due to the company’s $1.9 billion capital resources held in addition to the minimum regulatory requirement.
Credit metrics for Suncorp Group and Bendigo and Adelaide Bank remain “broadly unchanged”, Moody’s said, and Suncorp’s general insurance performance is likely to benefit from “bolstered reinsurance protection and price increases on personal lines”.