AMP Life sale halted, dividend scrapped

17 July, 2019, 18:33 | Author: Regina Silva
  • AMP is an Australian financial services company. This is its office in Melbourne

AMP said the rejection was disappointing as the sale of AMP life was a key element of AMP's strategy.

Many changes had been made to the AMP business in expectation of the sale, and Hutchinson said he expected it would proceed either with new terms with Resolution Life, or a new buyer.

AMP shares plunged as much as 8.8% in early Sydney trading, hitting a record low of A$1.96.

In considering the application, Reserve Bank Deputy Governor Geoff Bascand said the bank had tried to maintain a focus on the interest of policyholders while observing regulatory requirements.

"As a result, Resolution Life does not expect RBNZ to approve an application that would satisfy the condition", it told AMP.

Nonetheless, AMP said it was now working with Resolution Life to find a solution.

The 170-year-old company announced on Monday morning its proposed deal with London-based Resolution Life was on the rocks following an intervention by the Reserve Bank of New Zealand.

"AMP believes that this reflects RBNZ's position and that addressing these requirements would adversely impact the commercial return of the sale for both AMP and Resolution Life", AMP said.

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However, AMP indicated it would have no choice but to hold on to its life business if the right offer failed to emerge.

A report by the two New Zealand life insurance industry regulators, the Financial Markets Authority and RBNZ, released in January this year made a number of damning conclusions about the sector, including that it is vulnerable to misconduct, is ignoring whether its products are suitable for customers and is slow to make changes.

"This will require negotiation of new terms and is not certain", AMP said.

AMP said that since June 2018, its "best estimate" assumptions would have about a $400 million impact, and government legislation to stop people from paying for unnecessary life through their super would have a $300 million impact.

Others described the probable cancellation as an accidental win for AMP given that analysts had seen the sale price as too cheap.

Shares AMP took a dive when the company first announced the sale of Life in October past year for $3.3 billion, including $1.9 billion cash.

If a revised deal can't be reached, AMP intends to retain and manage the unit as a specialist life insurance and mature business.

AMP pointed out that 'given the uncertainty around the AMP Life transaction, the AMP Board expects to continue its prudent approach to capital management and anticipates that an interim dividend will not be paid for 1H 19'.

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