AMP: Resolution Life deal won't go ahead as is
AMP says the sale of AMP Life to Resolution Life is highly unlikely to proceed on the current terms.
Monday, July 15th 2019, 10:19AM
Russell Hutchinson
This is due to the challenges in meeting the condition precedent for Reserve Bank of New Zealand (RBNZ) approval.
AMP said the failure to meet this condition precedent was exceptionally disappointing as the sale of AMP Life was a foundational element of AMP’s strategy.
The A$3.3 billion deal was announced last year and 200,000 New Zealand life insurance policies were expected to change hands as part of it.
The regulator wants separation of the two businesses, with ringfenced assets in this country.
Insurance commentator Russell Hutchinson, of Chatswood Consulting, said AMP would have assumed that the Reserve Bank would be happy for the current situation, where the local business was operating as a branch of the Australian one, to continue when it transferred to Resolution Life.
But the Reserve Bank, under increased scrutiny over its prudential supervision of insurers in the wake of CBL, was not willing to let that happen.
Many changes had been made to the AMP business in expectation of the sale, and Hutchinson said he expected it would proceed either with new terms with Resolution Life, or a new buyer.
He said it was likely that he cost of holding capital in the New Zealand business would end up effectively covered by AMP.
Separation in the way the Reserve Bank wants would be a complicated process that would take significant time.
While the 1H 19 accounts are yet to be finalised, AMP expects to report a Level 3 eligible capital surplus above minimum regulatory requirements and in line with board limits for target capital surplus.
Given the uncertainty around the AMP Life transaction, the AMP board expects to continue its prudent approach to capital management and anticipates that an interim dividend will not be paid for 1H 19.
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