AMP life sale derailed, likely won’t pay interim dividend

AMP shares hit new low after it flags no interim dividend, because $3.3bn sale of life business is now “highly unlikely”.

AMP says it doesn’t anticipate paying an interim dividend. Picture: Hollie Adams

Embattled financial services provider AMP has warned it doesn’t plan to pay a first-half dividend in anticipation the proposed $3.3 billion sale of its Australian and New Zealand wealth-protection and mature businesses won’t go ahead.

The Australian company said a deal with Resolution Life Group Holdings was “highly unlikely” to proceed on the terms agreed due to the challenges of meeting conditions set by the Reserve Bank of New Zealand for approval.

In mid-morning trade, AMP shares were down 16 per cent at $1.80 after hitting a record low of $1.77.

Brokerage Macquarie said the developments raised the risk that AMP will need to undertake a capital raising to strengthen its balance sheet, particularly as payouts for compensation and remediation rose. “We expect AMP to increase their provisions for advice remediation, which could be the catalyst for a raising,” Macquarie told clients in a note.

AMP called today’s setback “exceptionally disappointing”, as the sale of AMP Life was a “foundational element of AMP’s strategy”.

AMP said it was working with Resolution Life to determine if there is a solution that would address policyholders’ interests and regulatory requirements, but that will require the negotiation of new terms and “is not certain”.

It added: “The interests of policyholders, both in New Zealand and Australia, have been and will continue to be paramount.”

AMP said it will retain AMP Life and manage it as a specialist life insurance and mature business if a revised transaction cannot be achieved.

As part of a sweeping overhaul unveiled last October, AMP agree to sell its AMP Life unit to Resolution Life for $3.3 billion, including $1.9 billion in cash.

The proposed sale was greeted with a shareholder backlash.

Then, New Zealand’s central bank earlier this month notified AMP that it didn’t expect to approve the company’s application for approval of the deal.

RBNZ asked Resolution to alter its current branch structure to include separate, ringfenced assets held in New Zealand for the benefit of New Zealand policyholders.

But AMP said “addressing these requirements would adversely impact the commercial return of the sale for both AMP and Resolution Life”.

AMP said it currently expected a level 3 capital surplus above the minimum regulatory requirement for the first half of its financial year, but that given the uncertainty around the AMP Life sale it now didn’t anticipate paying an interim dividend.

The company paid an interim dividend of 10 cents per share in August 2018. AMP cut its full-year dividend from 14.5 cents to 4.0 cents per share in February after full-year profit plummeted 97 per cent to a worse-than-expected $28 million.

The sale of its life business to Resolution was met with scepticism by several key AMP shareholders, who questioned the value of the deal.

The transaction came in the wake of the company’s mauling at the financial services royal commission, where the fees-for-no-service scandal prompted a clear-out of AMP’s top brass and millions of dollars in remediation to customers.

AMP has since been hit with a number of shareholder class action suits and compliance orders from regulators amid ongoingconcerns over the company’s management.

More than $10 billion has been wiped from the company’s value since March 2018 with shares in the company falling from $5.43 to an all-time low of $1.97 last month.

Dow Jones Newswires, AAP