The AMP Limited (ASX: AMP) share price is in focus today after the business announced a $524 million asset sale.
Resolution Life sale
AMP revealed that it’s selling its 19.13% equity interest in Resolution Life Australasia (RLA) for $524 million to Resolution Life Group.
This completes the exit from its former life insurance and mature business, AMP Life, which it sold to Resolution Life in 2020 for a total of $3 billion, including the equity interest in RLA.
This divestment has been agreed as part of the 2020 sale, and values the RLA stake at its ‘carrying value’ in AMP’s accounts at 30 June 2021.
AMP and RLA have also agreed to settle a number of post-completion adjustments and claims between the parties, which has resulted in a net payment of $141 million to RLA from AMP. AMP had partly provisioned for these items but following the acceleration of this settlement, it will record an additional one-off expense of approximately $65 million in FY21.
What does this mean for AMP?
Firstly, it’s sending the AMP share price higher.
AMP said the divestment will strengthen AMP’s available capital by approximately $459 million, providing further flexibility ahead of its planned demerger of AMP Capital’s private markets business in the first half of FY22.
The diversified financial financial business said the business is continuing to invest in the transformation and growth of its wealth management and bank businesses, as well as providing capital to support the growth of its private market businesses and to continue to actively defend its real estate business.
Management comments
AMP Chief Executive Alexis George
said: “This divestment brings to a close our long and proud involvement in life insurance in Australia and New Zealand.
“It enables us to realise capital to further strengthen our balance sheet ahead of our demerger and continue supporting our businesses.
“The separation of our businesses is progressing well and will continue until mid-next year as planned. We will continue to provide transitional services to RLA, as agreed, and will have a shared customer and adviser connection into the future.”
Summary thoughts on AMP and the share price
The AMP shares are currently up almost 3% after this announcement. It makes sense for AMP to sell businesses to raise money. Time will tell what happens after the asset sales. I think it’s a good move, but I don’t think I’d choose to invest in AMP with growth such an uncertainty for the business.
There are other ASX dividend shares I would rather look at for income.
