AMP plunges 25pc to record low after outflows hit $1.5bn as customers flee to industry super

AMP’s bank inquiry nightmare is coming true as customers flee into the arms of industry funds and its shares plummet.

AMP acting CEO Mike Wilkins. Picture: James Croucher

Customers yanked money out of wealth manager AMP in droves during the September quarter, as financial services royal commission revelations helped hit the embattled company with six-fold increase in fund outflows.

Amid widespread losses on the ASX, AMP shares closed at a fresh record low of $2.50, down nearly 25 per cent, after it warned that outflows were likely to continue until the final report of the Hayne royal commission into finance sector misconduct.

The public has been shocked at the reports regarding AMP that have emerged from the royal commission, including those which said the wealth management group routinely charged fees for no service and billed dead people.

AMP said $1.5bn of funds flowed out of the wealth business in the three months to the end of September, up from $243 million in the June quarter, after AMP was exposed for charging fees for no service and appearing to mislead the regulator over an independent report to the Australian Securities and Investments Commission.

The revelations have already sparked a massive upheaval at the company with Chairman Catherine Brenner, chief executive Craig Meller and three directors resigning.

Acting chief executive Mike Wilkins said the funds appeared to be flowing to industry super funds, some of which have reported a doubling in monthly inflows since July after they were all but cleared of any of the wrongdoing at the royal commission.

But Mr Wilkins said the problem in the business was a lack of inflows, rather than the outflows, and he expected this to continue until the final report of the Hayne royal commission.

Mr Wilkins said feedback from front line staff indicated there were concerns among potential customers about the revelations at the royal commission. “As people are turning up at the door it has been taking longer for that to translate into sales,” Mr Wilkins said.

AMP is also facing a number of competitive tenders to retain business from customers as part of regular reviews of their business. Mr Wilkins said AMP would compete for that business and expected to retain it. Yet this week Australia Post dropped AMP as the manager of its $300 million default super fund.

AMP’s Australian Wealth Management assets under management increased by $579 million during the quarter to $132.6 billion thanks to market growth and inflows from the AMP capital business.

The outflows came to light as AMP sought to simplify its business with $3.3 billion of deals to offload its wealth and New Zealand businesses.

AMP’s life insurance business — which endured another $22 million of claims losses in the September quarter — is being offloaded to a London and Bermuda based company Resolution Capital.

Under the deal AMP will take cash as well as preference shares in the life business and a 20 per cent stake in Resolution to exit full ownership of the business.

It has also taken out reinsurance contract covering 65 per cent of the book in its New Zealand wealth business with global giant Swiss Re in a deal that will return an estimated $150 million of capital to AMP. Further capital could be returned next year via a planned float of the NZ business.