AMP originally announced the sale of its life businesses on both sides of the Tasman to Bermuda-based Resolution Life for A$3.3 billion in October 2018.
However, the deal in New Zealand ran into trouble last July when the Reserve Bank, which is the prudential regulator, kyboshed the proposed deal.
AMP had expected the regulator would allow Resolution to operate the New Zealand business as a branch of the Australian business, as AMP currently operates.
But the RBNZ then said that Resolution must agree to have separate, ring-fenced assets held in New Zealand for the benefit of the New Zealand policyholders.
AMP and Resolution renegotiated the deal in August 2019, reducing the value of the transaction to A$3 billion with AMP receiving A$2.5 billion in cash but keeping a 20% stake in Resolution Life Australia.
The two companies have now satisfied the Reserve Bank.
The regulator says it has approved a revised arrangement that is subject to a number of conditions imposed to protect policyholders.
Deputy governor and general manager for Financial Stability, Geoff Bascand, the Reserve Bank has been reviewing the proposed transaction and consulting with the parties involved over the past 18 months to ensure the deal met its requirements,
The transaction involves a change of control and ownership of AMP Life from AMP Ltd to Resolution Life.
"AMP insurance policy holders’ relationship in New Zealand is with AMP Life and, while that company will have a new owner, existing policy entitlements are unaffected by this transaction," the bank says in a statement.
“Because AMP Life is a branch of an Australian business and intended to be in ‘run-off’ and not write new business, special arrangements were needed for the security of New Zealand policyholders.”
“A bespoke trust model has been established that ensures supervisory objectives are better met, future industry dynamics are generally more positive, and there is additional protection in the event of insolvency - one of the key risk considerations that we have been seeking to mitigate,” Bascand says.
The trust is required to hold capital and assets in New Zealand that help provide long-term security for policyholder benefits or investments, where relevant. The trust will be under the management and scrutiny of relevant officers in New Zealand, who have appropriate influence and authority in respect of the New Zealand operations, for the purpose of securing equity across all policyholders.
In addition, the model will see the establishment of a new, locally incorporated insurer Resolution Life New Zealand (RLNZ). The RLNZ board will have a majority of New Zealand resident, independent directors. RLNZ will act as Trustee to the Trust and will effectively manage the assets held in the Trust.
AMP Life has also established a New Zealand Policyholder Advisory Committee. The Committee is a sub-committee of the AMP Life Board, and will include RLNZ’s independent directors. Its purpose is to provide advice to the AMP Life Board on matters relating to the interests of New Zealand policyholders.
Approvals required to support the model have been granted by the Reserve Bank.
In making its decision the Reserve Bank sought and considered advice from an independent actuary, and liaised with the Australian Prudential Regulation Authority (APRA) in reaching our conclusion.
However, a petition against the sale is due to be heard before a Parliamentary select committee next week.
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