Thursday 8th August 2019
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AMP remains determined to divest its New Zealand wealth management business after renegotiating the sale price of its life insurance business on both sides of the Tasman to Bermuda-based Resolution Life for A$3 billion.
That’s A$300 million less than the original price after the Reserve Bank of New Zealand refused to give its approval for the NZ life business to continue to operate as a branch.
Instead, RBNZ is insisting that Resolution Life agree to have separate, ring-fenced assets held in New Zealand for the benefit of the New Zealand policyholders.
However, under the new sale agreement, AMP will have to leave A$500 million in the life business, becoming a shareholder with about 20 percent of Resolution Life Australia.
The new sale agreement remains conditional on regulatory approvals, including that of RBNZ.
AMP and Resolution Life “are continuing to work productively with the Reserve Bank of New Zealand to address their requirements for change in control,” AMP says.
In October last year, AMP signed the agreement to sell the life business for A$3.3 billion, however, in mid-July, it said events since then reduced the life businesses’ value by about A$700 million and perhaps more.
Today, AMP's New Zealand wealth business said its underlying operating earnings were steady in the six months ended June for which its Australian parent has reported a A$2.27 billion net loss compared with a A$128 million net profit in the same six months last year.
The Australian parent is also raising A$650 million in new equity, which is fully underwritten, to fund a new strategy to “reinvent AMP as a contemporary wealth manager” and fix legacy issues.
The parent’s results showed the NZ wealth business’ earnings for the six months fell 21.4 percent to A$22 million.
The domestic wealth business “delivered a resilient performance in the face of increased competition,” the parent company says, blaming the earnings decline on the removal of revenues from the New Zealand life business.
It says it continues to localise the NZ wealth business and is exploring options to divest it. AMP had originally planned to float the business on NZX, an idea that appears to have fallen by the wayside.
The NZ wealth business suffered net cash outflows of NZ$262 million in the latest six months, a turnaround from the NZ$54 million inflow in the previous first half.
The company attributes the outflow to increased competition, regular retirement withdrawals and first-home buyer withdrawals from its KiwiSaver scheme.
Nevertheless, funds under management grew slightly to NZ$12.5 billion while KiwiSaver funds under management rose to NZ$5.6 billion from NZ$5.2 billion.
Chief executive of the NZ wealth business, Blair Vernon says the business is now focused on “the renovation and simplification of our distribution channels and continuing to improve our product and service offering for our clients locally.”
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