AMP, reeling from major financial sector misconduct problems in Australia, plans to spin out its New Zealand wealth management and advice division in an initial public offering next year. It will also sell its Australian and New Zealand life insurance businesses.
The Australian financial services firm has been reshaping under new leadership, as it tries to rebuild a reputation tarnished by unethical practices uncovered by Australia’s Royal Commission investigation into misconduct in the financial services sector.
AMP’s restructure has included a review of AMP’s portfolio of businesses spanning banking, insurance, wealth management, financial advice and funds management.
That shake-up will see AMP exit its New Zealand wealth management and advice businesses through a public offer next year, provided the market conditions are right.
AMP has also agreed to sell its Kiwi and Aussie life insurance businesses AMP Life to UK-based Resolution Life for A$3.3 billion in cash, preference shares and future earn-outs. The firm has also signed an agreement with Swiss Re to reinsure the Kiwi retail wealth protection business before the planned sale, freeing up A$150 million of capital.
AMP, which was rocked by a fees-for-no-service scandal in Australia involving financial advice, and which also charged 4600 dead customers A$1.3 million in life insurance premiums, joins a number of Australian financial services companies geting rid of wealth, funds, and insurance divisions in the wake of revelations of serious misconduct and conflicts of interest. (See Newsroom’s story on vertical integration in the Australian banking sector.)
Australian banks ANZ and CBA recently sold their New Zealand life insurance businesses (OnePath Life and Sovereign, respectively) to insurance companies Cigna and AIA.
AMP says it hasn’t yet decided whether to list its New Zealand wealth management and advice division on the NZX alone or to also list on the ASX. AMP group shares are currently dual-listed.
The Kiwi businesses contribute operating earnings of about A$40 million on a standalone basis. The spin-out won’t include the local AMP Capital funds management unit.
“The IPO would release capital to AMP and create a standalone New Zealand wealth management and advice business,” AMP said in a statement. If it goes ahead, the offer will be made under New Zealand law.
“The completion of our portfolio review marks a major step forward in reshaping AMP as a simpler, more focused group, that is well-positioned to compete in our core markets,” acting chief executive Mike Wilkins said.
Incoming CEO Francesco De Ferrari has been tasked with transforming AMP, which Wilkins said will be easier with the extra flexibility created by the exits.
Separately, AMP reported a net cash outflow of A$1.5 billion in the three months ended Sept. 30, with weaker inflows since the firm’s appearances at the Royal Commission earlier this year. Those hearings uncovered the firm misled the Australian Securities & Investments Commission over charging fees to customers who were provided no services in return.
The New Zealand business largely avoided the scandal, operating under a different regulatory framework. Managing director Blair Vernon said the proposed changes won’t affect existing insurance policies or investment schemes.
“AMP New Zealand is a highly efficient, well-run business which has been a consistent contributor to AMP,” he said in a statement. “A strong team with a history of consistent delivery for all stakeholders has prepared AMP New Zealand for this significant change.”
The New Zealand financial services unit’s net cash inflow improved to A$81 million in the September quarter, due to increased inflows and smaller outflows from its insurance and non-KiwiSaver investment products. KiwiSaver funds under management swelled to A$4.98 billion, rising at a slower pace than the previous quarter due to increased competition and a higher number of retirement withdrawals.
AMP’s shares fell 1.7 percent to $3.50 on the NZX.