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AMP to divorce British business

Jenny Ruth

Thursday 1st May 2003

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Jenny Ruth
The pain has obviously become too great and AMP is abandoning its ambitions to be a global player and will separate its healthy Australian and New Zealand businesses from its haemoraging British operations at the cost of a further $A2.6 billion ($NZ2.9 billion) in writedowns.

This is on top of $A1.57 billion in writedowns of the British business announced with the annual results in late February.

"In effect, we are bringing AMP back home," chief executive Andrew Mohl told jounalists.

The writedowns and separating the company into two means AMP also has to raise a further $A1.5 billion in fresh equity to shore up its weakened balance sheet. The equity raising is fully underwritten by UBS Warburg.

AMP requested a halt in trading in its shares, preferred securities and income securities while it set about raising $1 billion from institutional investors. The results will be announced by Monday when the securities are expected to resume trading. A $A500 million share sale to retail investors is set to open on 21 May.

Mohl denied that the timing of the capital raising was designed to get in ahead of Royal & Sun Alliance's float of its Australian and New Zealand operations, now called Promina, for up to $A2.1 billion. The institutional book build to set the price for the Promina shares is set to open next Wednesday.

Mohl said that "it just so happens" that the AMP raising got in ahead of Promina while AMP chairman Peter Willcox said once the decision to separate the company had been made the capital raising had to be done as soon as possible "regardless of what anyone else is doing."

AMP's Australasian operations will retain the AMP name while the British operations will be renamed Henderson. Both companies will be listed on the Australian Stock Exchange and Henderson might be listed in London in future.

The separation will most likely involve a distribution of Henderson shares to AMP shareholders.

The money raised will be used to repay internal debt, eliminating the interdependencies between Britain and Australasia, and to reduce AMP's external debt to about $A3 billion.

Mohl says AMP will have a credit rating no worse than "A+" after the split while Henderson will have a "BBB" rating.

Willcox says the split was the result of the strategic review underway since his and Mohl's appointments last September and represents the need to "once and for all to be able to draw a line in the sand on the issues of the past."

The key finding of the review was that "there's no longer a compelling reason to keep the current mix of businesses together and powerful reasons to separate them along regional lines," he says.

As part of the split, AMP has decided to permanently reduce the British operations' exposure to equities. That will crystalises losses to date and is the major reason for the writedowns.

Mohl says the other option facing AMP was to keep putting fresh equity into the British operations. That would have resulted in 90% of any upside going to British policyholders but 100% of any downside being borne by AMP shareholders and that wasn't an acceptable risk profile.

AMP also announced a $A61 million net profit for the first quarter of this year but provided no comparison with last year. AMP made an $A896 million net loss in 2002.

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