Resolution Life, AMP back in talks over $3.3bn life business acquisition

UK-based Resolution Life says it is now in discussions with AMP to try to rescue their $3.3bn deal.

Resolution Life’s Sir Clive Cowdery. Picture: James Croucher

UK-based Resolution Life says it is in discussions with AMP to try to rescue the $3.3 billion deal for its life business, just hours after the wealth giant warned the sale was unlikely to go ahead.

AMP earlier revealed that the Reserve Bank of New Zealand would not back the sale of its life business to the UK-based insurer unless Resolution agreed to “ring-fence” certain assets to benefit New Zealand policyholders.

Reaffirming its strategic interest in expanding in Australia and New Zealand, Resolution Life said it viewed the acquisition as “an excellent opportunity”.

“As such, the two parties are now engaged in discussions regarding a restructuring of the transaction (including updated terms) to accommodate the regulatory requirements while delivering a de‐risked transaction with execution certainty, which meets the needs of all stakeholders.”

On Monday, AMP told shareholders the transaction was unlikely to proceed on the current terms and warned it did not expect to pay a first-half dividend as a result. It also said addressing the RBNZ’s requirements would “adversely impact the commercial return of the sale for both AMP and Resolution Life”.

Brokerage Macquarie had earlier said Monday’s developments raised the risk that AMP would 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”.

In an announcement to the ASX on Monday morning, 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”.

With The Wall Street Journal