NZ Reserve Bank scuppers AMP Life sale

AMP is an Australian financial services company. This is its office in Melbourne

AMP is an Australian financial services company. This is its office in Melbourne

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.

Resolution Life said it continued to view the purchase as "an excellent opportunity" and that it was talking to AMP about restructuring the deal "to accommodate the regulatory requirements".

According to a statement by AMP, Britain based Resolution Life, the prospective buyer had informed the RBNZ that it meant to create separate financial assets to safeguard the interests of policy holders in New Zealand, a move which has the potential to harm both Resolution Life and AMP.

The sale "is highly unlikely to proceed on the current terms due to the challenges in meeting the condition precedent for RBNZ approval", AMP says in a statement.

"The reality is, the commercial terms of the contract can't be met satisfactorily between AMP Life NZ and Resolution Life". AMP has previously said that float would be delayed until the completion of the sale of the life businesses to Resolution Life.

"RBNZ does seem to have a renewed focus on a stronger financial sector, and perhaps there have been some calls that are stronger than what there have been in the past", Leung added.

"As a regulator, they're becoming a lot tighter in their oversight of those companies with global links to their economy", said Sean Sequeira, chief investment officer at Australian Eagle Asset Management, which holds AMP shares.

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

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

The impact on earnings from unwinding the risk sharing agreement with Resolution Life from June 30 a year ago won't be substantial, the company says.

AMP said 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.

The financial services firm announced plans in October 2018 to sell its Australian and New Zealand life insurance business to Resolution Life for A$3.3 billion while splitting off its New Zealand wealth and advice arms into a separate business.

"If a revised transaction can not be achieved on acceptable terms, and receive regulatory approval, AMP will retain AMP Life and manage it as a specialist life insurance and mature business with a focus on policyholder outcomes, cost and capital efficiency".

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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