AMP Limited (ASX: AMP) has announced that it’s going to sell its ‘Wealth Protection’ and other mature businesses for $3.3 billion to Resolution Life.
AMP is one of Australia’s largest wealth management, banking and insurance groups. However, it has been under major scrutiny due to findings in the Royal Commission.
What is AMP Selling?
AMP is selling its Australian and New Zealand wealth protection and mature businesses (AMP Life) to Resolution Life for a total of $3.3 billion.
The $3.3 billion consists of $1.9 billion in cash, $300 million in AT1 preference shares in AMP Life and $1.1 billion in non-cash considerations.
That $1.1 billion non-cash is $600 million of future earnings from the mature business and $515 million of an interest in Resolution Life, which is focused on the acquisition and management of in-force life insurance books around the world.
AMP said that it expects to ‘monetise’ all non-cash considerations over time.
The financial business also announced that it has a binding agreement with Swiss Re to reinsure New Zealand retail wealth protection, releasing $150 million to AMP before the sale completes.
AMP Acting CEO Mike Wilkins said: “For shareholders, the agreement with Resolution Life and our exit from wealth protection and mature delivers important strategic benefits. It substantially simplifies our portfolio, delivers certainty and frees up capital.
New Zealand IPO:
AMP also plans to sell off its New Zealand wealth management and advice businesses through an initial public offering (IPO) in 2019 subject to market conditions and regulatory approvals.
In FY18 AMP calculated that these businesses produced operating earnings of approximately $40 million.
What AMP plans to do with the money
The exits from these businesses will allow AMP to simplify its earnings profile, allowing it to focus on higher growth businesses such as Australian wealth management, AMP Capital and AMP Bank.
The simplification and separation costs related to the Resolution Life sale are expected to be around $320 million after tax. The remaining $800 million will be used to reduce corporate debt by up to $800 million.
Mike Wilkins said: “The completion of our portfolio review marks a major step forward in re-shaping AMP as a simpler, more focused group, that is well positioned to compete in our core markets.”
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