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AMP Life deal is done

AMP Limited says it has completed the sale of its life insurance business, AMP Life, to Resolution Life for A$3 billion (NZ$3.19 billion).

Wednesday, July 1st 2020, 10:03AM 9 Comments

The total sale proceeds are A$3 billion, comprising A$2.5 billion cash and A$500 million equity interest in Resolution Life Australia, a new Australian-domiciled, Resolution Life-controlled holding company that is now the owner of AMP Life.

The final cash proceeds from the sale are subject to a number of post completion adjustments, however AMP expects the net proceeds to increase AMP’s capital in excess of target surplus by approximately A$1.1 billion.

AMP anticipates that any capital in excess of target surplus post completion will first be used to fund delivery of the new AMP strategy. Beyond this, AMP will assess all capital management options with the intent of returning the excess above target surplus to shareholders, subject to unforeseen circumstances and current economic and business conditions.

AMP will provide an update on its future capital framework and strategy at its interim results on August 13.

The separation of AMP Life will significantly simplify AMP’s group structure. The internal separation process included the transfer of approximately A$55 billion of client funds via several successor fund transfers.

Collectively these transfers represented one of the largest fund transfers of this kind and enables AMP to focus on its strategic simplification of its wealth management platforms and products.

In addition to its residual 20% holding in Resolution Life Australia, AMP will continue to provide technology and administrative services to AMP Life for a two-year period under a transitional services agreement. All customers’ terms and conditions will remain unchanged through the separation.

AMP chief executive Francesco De Ferrari said the sale was a “foundational step in AMP’s strategic transformation to become a simpler, client-led and growth-oriented organisation”.

“The sale is a major milestone for AMP demonstrating our ability to execute complex projects including through the difficulties of Covid-19,” he said.

“It is also a historic moment as AMP ceases to be a life insurer after 170 years. Our Life teams will move to Resolution Life and will continue to support clients who will see no changes in their policy terms or conditions.

“We are pleased to partner with an experienced operator in Resolution Life and deliver an outcome that is in the best interests of our clients, policy holders and shareholders.”

Tags: AMP Life insurance Resolution Life

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Comments from our readers

On 1 July 2020 at 11:47 am Tash said:
So sad for remaining policyholders.
AMP BDM's were crooning only a few years ago, ok maybe it's a little more than a few years ago, about the safety and security of being insured by a large respected organisation that was old and established. What a crock.

The only thing that matters is the policy benefits a client pays premiums for. Big, old, international all means nothing in a world where all insurers are licenced by the FMA, just look at who has disappeared in the last decade! Tower, Sovereign, AMP, AXA, all supposedly 'big, respected and safe'.
On 1 July 2020 at 1:12 pm All hat no cattle said:
Hold up.
Tower - bought by a viable and ongoing company.
So was Sov.
AMP bought AXA. At the time not a bad idea, just poorly done in the years after.
Of your list only 1 is in the situation AMP is now. The others are no comparison.
On 1 July 2020 at 4:18 pm Do what is right said:
Probably a good thing as AMP management had destroyed two companies. They purchased AXA and destroyed that book and were well down the road to totally destroying anything that was left.

How the managers at AMP retained their jobs will be one of the mysteries of life!
On 2 July 2020 at 6:57 am duncan said:
The demise of AMP is a text book study of how a market reacts to exec failure. The fact most independent advisers avoided AMP reflects well on the advice industry. What is scary is the execs who ran AMP still seem to be around running the rump run off life company or the high fee KiwiSaver business.

Given the uncertainty in many workplaces It is really hoped that advisers leaving their risk cover with this run off business are not going to cause unnecessary angst.
.
The Sov, AXA and Onepath situations are quite different as they were takeovers of successful companies.

AMP took a long time to finally hoist the flag of surrender.
On 2 July 2020 at 3:28 pm Tash said:
Regarding Sovereign, Axa, Tower and Onepath, they are still gone. Do you think happy shareholders sell? Either returns are a concern or life is getting too tough. Either way the promise of 'being around' has been broken.
On 3 July 2020 at 6:51 am JPHale said:
@Tash Agree on the promise of being around. Though the contrast AHNC highlighted is those purchasing in our market have traditionally done the better thing by integrating those policyholders into their business. AMP is excommunicating theirs.

Albeit the others have had some limitations on what they can do with pre-existing reinsurance treaties in the mix too.

Though they have been fully operating providers so there is some level of new business and adviser relationship driving the better management of the book that we don't have with AMP.

@Duncan solid points that the management and their intent is critical to the successful outcome of the business.

Either way I don't see the AMP experience improving and clients that have the choice of being somewhere else will be actively moved.

The reality is those that remain are going to find it harder to deal with the remaining company.
On 26 August 2020 at 2:56 pm Bryan Tucker said:
I worked at AMP in middle management and as a tied adviser for 27 years. It's only once you leave and are weened off the Kool-Aide that you realise how disastrously behind the times the company was.

They used to get away with it by 'loving' their advisers and feeding them BS. Then the ex-banker management took over, the loving stopped and the BS stopped ringing true.

On balance, the New Zealand insurance and investment buying public will be better off when this company ceases to exist.
On 27 August 2020 at 2:06 pm Amused said:
Well said Bryan Tucker. And as others have noted above also how is it that the AMP execs responsible are still employed in key roles? A swift clean out of the "ex-banker management team" would be a excellent step in the right direction to see AMP potentially stop their ship from foundering. Although I think at this stage passengers have already long departed in the lifeboats!
On 2 September 2020 at 2:27 pm sunny s said:
I see today (2 Sept 2020) AMP's new chairwoman has finally announced the whole business is on the block.

This will be a sad end after 160 years but as B Tucker says it was inevitable after 10 years of mismanagement both in AU and NZ.

Good on the new chair as customers, advisers locked into AMP and many good staff have suffered badly.

It has been hardest for the long suffering shareholders whilst execs have enjoyed the milk and honey.

Most of the world has moved whilst AMP has suffered gradual decline but remember some customers are still there including many Air NZ staff who have enough stress without the additional strain of being an AMP customer.

https://www.afr.com/chanticleer/amp-smart-to-put-itself-on-the-sale-block-20200902-p55rmn

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