AMP profit guidance dumped, life sale on

AMP has dumped guidance for 2020 underlying profit to be ‘broadly flat’ on last year.

AMP chief executive Francesco De Ferrari Picture: Britta Campion

AMP has dumped guidance for 2020 underlying profit to be “broadly flat” on last year, but committed to ruling off its life insurance divestment even as COVID-19 causes havoc in global economies.

The wealth company joined a flood of other local financial groups — including mortgage insurer Genworth and health insurer NIB — in withdrawing earnings expectations, as they brace for the coronavirus fallout.

For the 2019 calendar year, AMP reported a 32 per cent drop in underlying profit to $464m, while it had a statutory loss of $2.5bn on the back of large impairments.

AMP announced the withdrawal of guidance in an ASX statement on Thursday, and is also pulling away from its targeted $140m in cumulative gross cost savings for 2020.

AMP chief executive Francesco De Ferrari said the wealth group had taken the action in response to uncertainty in Australia and globally “to support our clients and people, while working to maintain the strength and resilience of our business”.

“Whilst the situation is rapidly evolving, our immediate priorities are to support the public health efforts, help our clients make the right choices, and ensure our people are safe and working in healthy environments,” he said. “Protocols and contingency plans are also in place to ensure our operations and client services can continue throughout the pandemic.

“Our group balance sheet and liquidity remain strong and we are confident in our ability to support clients in this time of need.”

AMP’s statement did confirm that it was otherwise sticking to its three-year transformation strategy, despite the challenging operating environment. Mr De Ferrari wants to simplify the business and make it more customer centric, after it was hit hard by several scandals over the past two years.

In the statement, AMP reiterated the sale of AMP Life remained “on track for completion” by June 30, and also said it was continuing a divestment process for its New Zealand wealth management unit.

A further update on the potential NZ sale will occur at or before its interim 2020 results.

The company’s shares rallied 8.3 per cent to close at $1.235 on Thursday, outpacing gains in the ASX 200.

“It’s not at all surprising that AMP has pulled guidance. Like all other companies, this was expected,” said Allan Gray managing director Simon Mawhinney.

Bell Potter analyst Lafitani Sotiriou highlighted the positives from AMP’s statement, including progress on divestments and its customer compensation program. “What we are encouraged by is the confirmation that the AMP Life sale remains on track for the end of June, and the anticipation of an update in relation to the New Zealand wealth sale, by August,” he said.

Mr Sotiriou is still holding out hope for a share buyback by AMP, on completion of the life insurance sale to Resolution Life.

The AMP statement also said its customer compensation program remained on course to be 80 per cent complete by the end of 2020 and fully done in 2021.