AAP Finance

AMP cuts payout as $3.3bn Life sale halted

By AAP Newswire

AMP shares plunged to a fresh all-time low after the beleaguered wealth manager said it would likely scrap its first-half payout in anticipation that the $3.3 billion sale of its wealth business will fail.

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.

The central bank had asked Resolution over the weekend to alter its current branch structure to include separate, ring-fenced assets held in New Zealand for the benefit of New Zealand policyholders.

AMP said addressing these requirements would adversely impact the commercial return of the sale for both parties.

"The failure to meet this condition precedent is exceptionally disappointing as the sale of AMP Life is a foundational element of AMP's strategy," the company said in a release.

Shares in AMP fell by as much as 17.6 per cent to a new nadir of $1.7725 within the first 45 minutes of trade on Monday, recovering a little ground as the session wore on.

The company was still trading 15.58 per cent lower at $1.8175 by 1501 AEST.

AMP said while there would be little earnings impact from the unwinding of the Resolution Life deal, future negotiations would be hampered by an estimated $700 million worth of liabilities and legislative impacts since June last year.

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

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

AMP said it will retain AMP Life and manage it as a specialist life insurance and mature business if a revised transaction cannot be achieved.

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

The sale, which was met with skepticism by several key shareholders, was part of a wider restructuring mission in the wake of AMP's mauling at the financial services royal commission.

The inquiry heard that AMP charged life insurance premiums to dead clients and told regulators that clients copped ongoing fees because of administrative errors when it was often a conscious effort by the company.

The scandal prompted a clear-out of the company's top brass and hundreds of millions of dollars in remediation to customers, eroding AMP's profit and decimating its share price.

More than $10 billion has been wiped from the company's value since March 2018 with shares in the company falling from $5.43 at that time to a previous all-time low of $1.97 last month.

AMP has since been hit with a number of shareholder class action suits as well as compliance orders from regulators amid ongoing concerns over the company's management.

AMP said on Monday it expects to report a Level 3 eligible capital surplus above minimum regulatory requirements and in line with board limits for target capital surplus in its first half results on August 8.

But it said an interim dividend for the six months to June 30 was "unlikely" due to the uncertainty around the Life deal.

The company paid an interim dividend of 10 cents per share in August 2018.

AMP cut its full-year dividend from 14.5 cents to 4.0 cents per share in February after full-year profit plummeted 97 per cent to a worse-than-expected $28 million.

In May, AMP shareholders voted in favour of the company's remuneration report, but the leadership team said further uncertainty lay ahead as it embarked on a multi-year journey to lift earnings and rebuild its share price.