AMP has reignited plans to divest ‘manage for value’ businesses – including the NZ financial services arm – after a brief hiatus in the wake of a disastrous appearance at the Australian Royal Commission (RC) into banking et al.
Mike Wilkins, acting AMP chief, told analysts at a half-year results briefing last week the company had adopted an “appropriate sense of urgency” as it sought to divest the now-unwanted assets.
As well as the NZ financial services business (which includes the $5 billion plus KiwiSaver scheme), AMP earmarked its life insurance and ‘mature’ book for review last year.
However, the review process was put on hold in April following a dramatic RC performance that culminated in a board clean-out and the exit of multiple executives, including chief, Craig Mellor.
Since April AMP appointed Wilkins as interim chief executive officer while former Commonwealth Bank of Australia head, David Murray, came on as chair in June.
Wilkins said with the AMP ship somewhat steadied the firm was now ready to jettison the ‘manage for value’ businesses.
He said the NZ financial services business (which excludes AMP Capital) remained “attractive” despite seeing half-year profits slump by almost 14 per cent compared to the same period in 2017. According to the AMP results, the NZ division churned out an operating after-tax profit of A$56 million over the six months to June 30 – down from A$65 million in the first half of 2017.
The NZ financial services arm has an ‘embedded value’ of about A$1.4 billion, according to the latest AMP accounts.
“We’re in talks with a number of interested parties,” Wilkins said. “A sale is just one of the options – a number of others are available to us.”
The group’s other under-review businesses – mature (such as whole of life policies) and life insurance – saw six-monthly profits fall by 6.7 per cent and 98 per cent respectively year-on-year.
AMP’s life insurance unit recorded a profit of just A$1 million during the first six months of 2018 (A$52 million last year) due to “deterioration in experience and capitalised losses”, the investor report says.
The AMP group spent A$19 million in the first half of 2018 on scoping out options for the under-review business units and A$13 million on costs rising directly from the RC.
Over the final half of 2018 AMP says “costs related to the Royal Commission, portfolio review and significant regulatory and compliance project costs [were] expected to be broadly in line with [the first six months of the year]”.
AMP also booked “advice remediation and related costs” of A$312 million in the first half of 2018 while forecasting related expenses of A$150 million over the next three years.
Among the contingent liabilities, AMP lists a post RC civil action by the Australian regulator and five “competing shareholder class actions”. The firm has also committed $90 million over the next 12 months to purchase AMP-linked Australian financial advice businesses under controversial ‘buyer of last resort’ agreements. Furthermore, AMP cut profit forecasts for its Australian wealth management businesses by an annual $50 million from 2019 after cutting investment platform fees.
Since December 2017 the AMP Australian financial adviser network shrank by almost 5 per cent to close at 2,566 as at June 30 this year. Wilkins said that amounted to a net loss of about 130 advisers comprising 270 exits and 140 new financial planners joining across the group’s multiple advice labels.
“The majority [of the exits] was retiring advisers,” he said, with younger advisers now filling the breach.
“I think that’s healthy,” Wilkins said.
AMP NZ counts 557 advisers under its umbrella, the group report shows.
Meanwhile, AMP Capital NZ, which is not included in the for-sale items, saw assets under management jump by 10 per cent over the 2017 calendar year, finishing the period at A$19.6 billion (about NZ $21.75 billion).
The AMP share price closed down 2.8 per cent last Friday at NZ$3.82.