Investor anger over collapse in AMP value

AMP’s biggest investors are urging the company to hose down bushfires seen to be damaging the business from the inside out.

Former AMP CEO Craig Mellor with chairwoman Catherine Brenner. Picture: AAP

Amid intense pressure at the board level, AMP’s biggest investors are urging the company to hose down bushfires seen to be damaging the business from the inside out.

The fees-for-no-service scandal and the company’s tampering with the supposedly independent Clayton Utz report add to a long list of disappointments for shareholders in AMP, with the collapse in the group’s value a source of frustration for investors. Some shareholders have been keen for a regime change for some time.

With shareholder discontent about chairwoman Catherine Brenner potentially soothed by her possible removal, following the exit of former chief executive Craig Meller in the wake of the shocking revelations heard at the royal commission, the focus once again turns to the persistent lacklustre performance of AMP.

Counsel assisting the royal commission, Rowena Orr QC, on Friday alleged AMP committed criminal offences by misleading ASIC.

Ms Orr said it was open to Mr Hayne to find that in four of the 20 times AMP misled ASIC over a fee-for-no-service scandal it breached two sections of the Corporations Act that carry criminal penalties.

The board of AMP is believed to have last night asked chair­woman Catherine Brenner to resign after two weeks of turmoil at the $11.7 billion financial services giant, triggered by the banking royal commission.

A spokesman for AMP last night declined to comment.

According to Shaw and Partners senior financial analyst Brett Le Mesurier, AMP must deal with its dwindling financial adviser numbers, falling wealth management revenue and the likelihood its already-weak product sales will weaken further. “The AMP share price has fallen — continues to fall — and if the observations described above are correct, should fall further,” Mr Le Mesurier said.

Bell Potter’s Lafitani Sotiriou, who has been advising against investing in AMP for two years, said the financial performance of the group would continue to suffer through any overhaul.

“A new board, along with a new CEO, is likely to cull a big chunk of the senior executives,” Mr Sotiriou said. “The culture needs to change, and accountability installed. This will be disruptive to the business.”

Although AMP earlier this year bounced back from its biggest loss in more than a decade, large institutional shareholders have been pushing the company to sell off its troublesome parts.

The company’s register includes activist hedge fund Harris Associates, AMP’s biggest individual holder with a 6.45 per cent stake. Funds management group Perpetual has been selling its long-held stake in the group since earlier this month.

The 2016 annual loss of $344 million was the worst result for the company in 13 years. AMP that year earlier took a $1.3bn writedown on life insurance division as insurance claims, driven by a spike in mental health claims, pushed the company into the red

AMP recently took steps to reinsure its problematic life insurance division following a tumultuous year of blowouts in claims and a fall in superannuation contributions following government reforms.

AMP is poised to announce the results of a strategic review of the life insurance division, which could result in the sale of the division, at its annual general meeting in Melbourne on May 10. The royal commission and the fallout that has pummelled senior management at the iconic company have come at an inopportune time for executives as they attempt to unveil the company’s new strategic direction.

Large vertically integrated groups around Australia are pulling out of the life insurance industry amid intense parliamentary scrutiny and regulatory overhaul. The royal commission is only hastening such moves.

AMP was also investing heavily in its financial advice division and its fast-growing banking operations. Evidence heard during the royal commission shows the company has much more to spend on compliance in financial planning.  AMP has also found itself on the wrong side of the industry relating to a new cross-sector code of ethics designed to limit fee gouging in the nest egg sector.

The overwhelming majority of the super industry has signed up to the Insurance in Superannuation Working Group code of practice.

Companies accounting for about 93 per cent of MySuper assets have signed up to the code or signalled their intention to join.

AMP, which is responsible for about 5 per cent of MySuper funds, has taken issue with the code’s target of limiting insurance premiums to 1 per cent of a particular saver’s earnings, which it believes may contravene competition laws.

AMP has also been threatened with three class action suits.