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AMP Ltd (ASX: AMP) is financial services company in Australia and New Zealand. AMP specialises in providing personal and business financial services that include superannuation and investment products, insurance, financial advice and a range of banking products such as home loans and savings accounts. Its market capitalisation is $A6.2 billion.
What has AMP announced today?
AMP announced today the completion of the sale of its life insurance business (AMP Life), to Resolution Life for A$3.0 billion. The sale is comprised of A$2.5 billion and A$500 million equity interest in Resolution life Australia, a new Australian-domiciled, Resolution Life-controlled holding company that is now the owner of AMP Life.
AMP notes that the company expects the net proceeds to increase AMP’s capital in excess of target surplus by approximately A$1.1 billion. Any excess of target surplus will be used to fund the delivery of the new AMP strategy.
This new AMP strategy was announced in HY19. The strategy included to reinvent wealth management in Australia, tackle legacy issues and position AMP Capital and AMP Bank for growth. This strategy is supposed to be implemented over a 3-year period, which was expected to cost around A$1.0 – A$1.3 billion.
The positive aspect about the sale of AMP Life is that it will simplify AMP Group’s structure. The separation process includes the transfer of around A$55 billion of client funds via several successor fund transfers. This should enable AMP to focus on its strategy to simplify its wealth management platforms and products.
What is the outlook for AMP?
The outlook for AMP is not very promising. Over the last 10-years AMP share price has decreased around 65%. AMP has also not yet fully recovered from the damning findings of the Hayne Royal Commission, which caused a spark decline in AMP’s market value. The question now for investors is, can AMP execute the company’s strategy of simplification with a focus on wealth management, can the company re-shape its image and can this all be implemented successfully over the 3-year plan?
The sale of AMP Life is a positive, as this sale can help move the company to execute AMP strategy. However, many more things need to be achieved by the company to successfully implement its 3-year plan and it is unclear whether AMP will ever recover its image after the Hayne Royal Commission findings.
What is the market reaction?
The market reaction to AMP’s announcement today is positive. AMP is up around 2.16% and is currently trading at A$1.895. This is a positive reaction as the Australian market is only up around 0.8%. AMP has a forward P/E ratio in the low-forties and has an annual dividend yield of around 0.04%.
Disclaimer:
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
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ASR has no position in any of the stocks mentioned.
