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$3b writedowns as AMP splits

By Nick Stride

Friday 2nd May 2003

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AMP's 92,000 New Zealand shareholders will be asked to dig into their pockets to support a split that will see them holding two separate shares.

The troubled financial services group yesterday announced the demerger of its healthy Australian and New Zealand operations from the British business.

AMP's shares were suspended from trading before the announcement of a further massive $A2.6 billion ($2.9 billion) writedown.

If approved by shareholders the split will take place in the last quarter of this year.

The company says the clean-out will close the book on the losses of its British life insurance operations, which have suffered alongside other British insurers from overexposure to shares in falling markets.

The Australasian company, with A-grade financial strength, will take the AMP name and will comprise the local operations of the financial services divisions, AMP Henderson and Gordian-Cobalt.

The British company will be called Henderson, will hold all the northern hemisphere assets, and will "target" a BBB credit rating.

Both companies will be listed on the Australian Stock Exchange and Henderson may seek a London listing.

AMP chairman Peter Wilcox said in a statement the plans were the culmination of the review initiated by chief executive Andrew Mohl when he took over last year.

"One of the key findings of the strategic review was that there was no longer a compelling reason to keep AMP's current mix of businesses together but powerful reasons to separate them."

The writedowns will come mainly from the sale of shares by the British operations to reduce equity market exposure.

To bolster the balance sheet AMP is going to institutional investors with a $A1 billion share placement.

Retail shareholders will be asked to subscribe for a further $A500 million worth of new shares, up to $A5000 each. The issues will be fully underwritten by UBS Warburg.

The proceeds will be used to repay external debt and debt owed between the two entities to eliminate the financial dependence of the British operation on the Australasian business.

AMP's shares are expected to begin trading again on Monday following when the outcome of the institutional placement is known.

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