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Quotemonster News: October 2018

AMP - what it all means

AMP's decision to sell their life insurance businesses, and run an IPO for the New Zealand wealth business, has generated a great deal of news. Here is a quick round-up plus some of my commentary at the bottom of this post.

  • Goodreturns post focuses on the impact on AMP advisers - a valuable perspective, link.
  • Interest.co.nz has a post by Jenée Tibshraeny that focuses more on Resolution Life and the IPO of the wealth business, a good read: link.
  • The AFR's piece focuses on the benefits for an Australian business free from the distractions of running a life business and NZ. Link.
  • Stuff talks about the brand disappearing from New Zealand. Link.

How big a deal you think this is depends on your point of view. On the one hand, this is a huge deal: AMP has been a major force in insurance for more than 150 years, so the fact that they will leave that market is very significant. On the other hand, recently, AMP has been much more of a wealth management business, and has not written much new business in recent years, as shown in the release by Blair Vernon at the time of the FMA review of QFEs.

This is different to the trend of Australian Banks selling their life insurance operations. With an IPO of all that remains, AMP may effectively leave New Zealand - it will be interesting to see. AMP’s ability to extract value from the transaction depends somewhat on the performance of the business sold to Resolution Life, so some issues such as pricing of the business, and rules governing replacement business, will continue to be important issues, with the impacts varying depending on product line (whole of life versus term insurance).

I am not sure how much this was driven by compliance concerns. AMP’s situation is not the same as, say, Australian Banks divesting themselves of advice businesses. I think this is more about AMP’s business performance. AMP’s process of considering the best way forward for these businesses commenced well before the recent Australian Royal Commission.

I am not expert in wealth management businesses, so may not be best placed to comment on the prospects for an IPO. There is much to interest a wide range of participants in the IPO, the recent growth in wealth business, the KiwiSaver default status, and more. I shall follow the progress with interest.

I note that AMP's share price is down about 10% today.

 

 

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