Yet another financial institution has flagged changes to its life insurance business with AMP announcing the release of $500 million in capital from AMP Life as part of new reinsurance arrangements.
In the release of its half-year financial results today, AMP announced new reinsurance agreements for its life business that will see the release of $500 million in capital from AMP Life.
The new reinsurance agreements include a new quota share agreement with General Reinsurance Life Australia Limited (Gen Re) to cover 60 per cent of the NMLA retail portfolio, which was merged with AMP Life on 1 January 2017.
The reinsurance agreements also include an extension to the existing agreement with Munich Reinsurance Company of Australasia Limited (Munich Re) to cover 60 per cent (up from 50 per cent) of the AMP Life retail portfolio.
There is also a new surplus cover agreement with Gen Re to assist in managing risk and volatility in individual retail claims.
Also included in the reinsurance agreements is a recapture of 35 existing reinsurance treaties, simplifying AMP's overall reinsurance arrangements, the statement said.
The new reinsurance agreements will commence on 1 November 2017 and, when combined with the first tranche of reinsurance completed in 2016, effectively means 65 per cent of AMP's retail life insurance portfolio will be reinsured for claims incurred from 1 November 2017, the statement said.
AMP also recorded a first half net profit of $445 million, a decrease from $523 million on the previous corresponding period.
Australian wealth management operating earnings were down 1 per cent to $193 million.
The result demonstrates effective margin management during the final transitions to low-cost MySuper funds and amid significant activity across the superannuation industry, AMP said.
To offset the impact of margin compression, AMP is targeting additional revenue growth from its advice and SMSF businesses, the statement said.
AMP expects revenue from its advice and SMSF businesses to grow in the second half of 2017 and accelerate into 2018.
This will support the delivery of AMP's target of 5 per cent overall revenue growth in Australian wealth management through the cycle, the statement said.
AMP chief executive Craig Meller said, “In wealth protection, we've completed a set of comprehensive reinsurance agreements, which will release capital from AMP Life and reduce earnings volatility.
“In wealth management, we've delivered a solid performance, managing margin compression effectively and showing our strength as the market leader for superannuation during a period of heightened market activity due to MySuper transitions.”
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