AMP (ASX:AMP) completes $3 billion sale. Dividend incoming?


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AMP (ASX: AMP) has announced it has finished its $3 billion sale. Is it going to pay a dividend?

What is AMP?

AMP is a diversified financial services company which has its primary operations in financial advice, including financial planning and wealth management. A big part of its business is licensing other planning groups to provide advice. AMP also has capabilities in investing (AMP Capital), banking and insurance.

What did AMP announce today?

AMP has announced the completion of its life insurance business AMP Life to Resolution Life for $3 billion.

Total sale proceeds are $2.5 billion cash and a $500 million equity interest in Resolution Life Australia, which will be 20% of the new entity.

The final cash proceeds are subject to a number of adjustments, however AMP expects the net proceeds to increase AMP’s capital in excess of its target surplus by about $1.1 billion.

What will AMP do with the money?

The first goal will be to fund the delivery of AMP’s new strategy. The diversified financial services business will provide an update on its future capital framework and strategy at its interim result on 13 August 2020.

However, AMP will think about returning excess capital to shareholders, subject to economic and business conditions.

AMP CEO Francesco De Ferrari said: “The sale of the Life business is a foundational step in our strategic transformation to become a simpler, client-led and growth-orientated organisation. 

The sale is a major milestone for AMP demonstrating our ability to execute complex projects including through the difficulties of COVID-19.”

Summary

It’s good to see that AMP is putting itself in a better financial position. It seems AMP is doing the right thing to turn things around, but I wouldn’t want to buy shares until I could see how AMP will generate sustainable earnings growth. One dividend isn’t enough to make me want to invest. At the moment I’d rather go for financial shares like Magellan (ASX: MFG) or Australian Ethical (ASX: AEF).

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Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned. 

Jaz Harrison

Jaz Harrison

Jaz is a keen investor who loves to thoroughly poke holes in an investment idea before it has a chance of making it into her portfolio. Jaz invests for the long-term and doesn't sweat the small stuff. She strongly believes that empowering people with knowledge is the best way for them to take charge of their finances, which is exactly the approach she takes with her own money and investments.