AMP Life sale back on track

Last month, it was reported that the AMP Life sale had been held up by the Reserve Bank of New Zealand and looked unlikely to proceed.

The RNBZ had not approved a change of control for the business in a form consistent with the current branch structure and would not consider a change of control applications unless AMP agreed to have separate ringfenced assets held in New Zealand.

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However, AMP has announced a revised agreement with Resolution Life with updated terms that will deliver a consideration of $3 billion ($2.5 billion in cash and $500 million in equity interest), with the sale expected to be completed by the first half of 2020.

The $500 million in equity will represent a roughly 20 per cent interest in the platform, which will provide an ongoing entitlement to an equivalent share of the new company’s earnings and distributions.

The proceeds from the sale will be used to fund separation costs, which remain at $320 million post tax, repay $800 million in debt and fund capital dis-synergies of $160 million.

Following these actions and the reduction in capital requirements, AMP’s proforma capital in excess of target surplus on completion will be approximately $1.15 billion.

As a result, AMP anticipates that this excess will first be used to fund its new ‘transformational wealth strategy’ and beyond this AMP will assess all options with the intent to return capital to shareholders.

The sale was initially controversial among shareholders but the board considers the sale to be the best outcome for stakeholders and believes the agreement “represents a fair valuation, given the significant impact of the Protecting Your Super legislation, the impact of best estimate assumptions since 1 July 2018 and the current legislative and regulatory environment”.

The agreement remains subject to regulatory approvals in Australia, New Zealand and China, and AMP is engaging with the regulators to address their requirements.