AMP’s life insurance New Zealand arm reported a 45 percent slump in operating earnings to A$39 million for calendar 2018, largely reflecting A$180 million of capitalised losses and about A$50 million of experience losses, This follows an increase in income protection and total and permanent disability claims.
The New Zealand wealth management business, the part that AMP intends to float, reported flat earnings of NZ$57 million, primarily supported by earnings growth in advice, the company says.
AMP is delaying the float until after the life insurance businesses on both sides of the Tasman have been separated and sold to Resolution Life.
While those results may look a little dismal, the Australian parent’s overall result was worse – a 97 percent slump in net profit to just A$28 million, down from A$848 million in 2017.
AMP attributed the profit fall to the reputational impact of the Australian royal commission, the costs of remediating past misconduct and the “subdued performance” of the wealth protection operations.
It says the group’s underlying profit, which determines the dividend, fell 35 percent to A$680 million.
AMP will pay a final dividend of 4 Australian cents per share, “in recognition of second-half 2018 performance, capital impacts and market uncertainties,” taking the annual payout to 14 cents, down from 29 cents the previous year.
AMP’s New Zealand managing director, Blair Vernon, says the wealth management operating earnings were offset by lower wealth management income resulting from a fall in assets under management of 3 percent to NZ$11.6 billion, “largely reflecting unfavourable investment market conditions.”
The company’s KiwiSaver schemes continue to grow with funds under management rising slightly to NZ$5.1 billion while controllable costs were largely flat at NZ$35.6 million.
“Despite challenging market conditions, we continued to deliver on our commitment to provide high-quality advice and services to support our customers through the country’s most extensive and diverse network of financial advisers,” Vernon says in a statement.
“In 2019, we will continue to prioritise the separation of AMP’s life insurance and mature business to Resolution Life. The separation will create an opportunity to establish and grow wealth management as a standalone business.”
Last October, AMP announced sweeping restructuring plans, including selling its Australian and New Zealand wealth protection and other mature businesses to British-based Resolution Life Group for A$3.3 billion.
Vernon says the separation “will include the repatriation of significant information technology and support services designed to deliver better outcomes for customers.”
He says the company is focusing on continuing to support advisers “to respond to the unprecedented period of change occurring in our industry, which reflects our unwavering belief that the provision of sustainable access to advice is critical for all New Zealanders and their long-term financial wellbeing.”
AMP expects to receive its individual report from the New Zealand regulators, the Financial Markets Authority and Reserve Bank, soon, “which we will thoroughly review to address any further actions to continue to protect the interests of our customers.”
The report on the life insurance industry by the two regulators was released in January and included a number of damning conclusions. These included that it is vulnerable to misconduct, is ignoring whether its products are suitable for customers, and is slow to make changes.
In particular, the regulators note that about 25 percent of the $2.57 billion New Zealanders pay in annual premiums goes on agents’ commissions, far more than in other countries. Mexico and Hungary are the next highest at about 15 percent, with Australia at about 12 percent, and the United States about 9 percent.
AMP ceased selling new life insurance policies from Jan. 1 this year ahead of the sale of that business.