AMP will exit life insurance in 2019, following a $3.3 billion sale of its wealth protection business. It will also divest its New Zealand wealth management and advice businesses via an IPO.
The completion of an AMP portfolio review led to the divestments. The buyer of AMP's life business is Resolution Life - a UK firm with offices in the US and Bermuda, and one which has flagged further interest in the Australian life insurance market.
AMP acting chief executive Mike Wilkins said the portfolio review reshapes AMP "as a simpler, more focused group, that is well positioned to compete in our core markets."
He explained that wealth protection customers will see no change to existing insurance policy terms or conditions.
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"For shareholders, the agreement with Resolution Life and our exit from wealth protection and mature delivers important strategic benefits. It substantially simplifies our portfolio, delivers certainty and frees up capital," Wilkins said.
He added that existing AMP wealth protection employees or "highly-experienced teams supporting insurance and mature customers are expected to largely transfer with the sold businesses, delivering continuity and stability for customers."
Finally Wilkins said the divestments pave the transformation process for incoming chief executive Francesco De Ferrari.
Resolution founder and Resolution Life executive chairman Sir Clive Cowdery said it respects AMP's life insurance business in Australia and New Zealand.
"Over 15 years and the acquisition of 27 life insurance companies, Resolution has developed an operating model which puts delivering policyholder benefits to existing customers at the centre of our business," Cowdery said.
"The acquisition of AMP Life is consistent with our strategy to grow the business beyond our traditional markets in Europe and the US and we see scope for further consolidation in the Australian life market."
The transaction is expected to complete in the second half of 2019.
As for AMP's New Zealand wealth management and advice businesses, the firm said its decision to divest via an IPO in 2019 remains subject to market conditions and regulatory approvals.
"These businesses have FY18 pro forma operating earnings of approximately $40 million on a standalone basis. The IPO would release capital to AMP and create a standalone New Zealand wealth management and advice business," AMP said.
Additionally, AMP has entered into a binding reinsurance agreement with Swiss Re for the New Zealand retail wealth protection portfolio. This is expected to release up to $150 million of capital.
This agreement is expected to be effective from 31 December 2018, and will cover about 65% of the New Zealand retail wealth protection portfolio for new claims incurred from that date.
AMP said the reinsurance agreement is expected to reduce New Zealand profit margins by $20 million on a full-year basis. The reinsurance outcomes are also factored into the Resolution Life transaction.
It added that separation costs related to the Resolution Life sale are expected to be about $320 million post-tax. Additional capital from the transaction with Resolution Life will facilitate a reduction in AMP's corporate debt of up to $800 million.
Finally, AMP Capital will continue to manage wealth protection assets under management. AMP Capital will also join Resolution Life's global panel of preferred asset managers.