1H 19 Results and business update
Today we have released AMP’s first half results, and a number of important announcements to reposition AMP as a simpler, customer and client-led and higher growth business including:
- a new strategy to reinvent AMP as a contemporary wealth manager
- a revised agreement to sell AMP Life (our life insurance and mature businesses)
- a capital raising to enable the company to commence the immediate implementation of its strategy, fund ongoing growth in our core businesses and provide balance sheet strength ahead of the AMP Life sale.
AMP’s performance in the first half of 2019 the year reflects the challenges we’ve faced as we transition and fundamentally reset the business.
In the first six months of 2019, AMP reported an underlying profit of A$309 million that demonstrates the strength of AMP Capital and a resilient performance in our Bank.
During the period, we have also taken a predominantly non-cash impairment of A$2.35 billion (post-tax) to reset the business and reflect the new strategy. It’s important to understand that this does not affect the financial stability of our business.
By taking this action, we are facing into the legacy issues and setting our business on a path to a stronger future.
Capital and dividend
As a business with a large customer and client base, we must hold a strong capital position to continue to honour our obligations. In the first half of 2019, we maintained this position, holding A$1.7 billion above minimum regulatory requirements.
Given that we have yet to complete the sale of AMP Life, the Board has made the difficult decision to not pay a first half 2019 dividend, maintaining a consistent approach to capital management until the completion of the sale of AMP Life.
Following completion of the sale of AMP Life, the Board intends to target a dividend payout ratio of 40-60% of net profit after tax, adjusted for non-cash items. As always, the payment of a dividend remains subject to the business’ financial performance and progress against the new strategy.
AMP Life sale update
I am pleased to inform you that we have reached a revised agreement to sell AMP Life to Resolution Life, an international insurance business. As a result of the revised agreement AMP will receive A$2.5 billion in cash, as well as a A$500m interest in Resolution Life Australia, a new Australian based company controlled by Resolution Life.
Before reaching this decision, the Board assessed the revised agreement against a range of options, including keeping the business as part of the AMP group, a demerger or further reinsurance. Much consideration was given to structural changes in the industry, that have restricted our ability to compete on a sustainable basis and deliver acceptable returns to shareholders.
After careful consideration, the Board agreed that the sale to Resolution Life delivers the best outcomes for our shareholders, policyholders and business. Importantly, there will be no change to policyholders’ existing terms and conditions.
This agreement replaces the original transaction with Resolution Life that we announced last year, which could not progress due to challenges in meeting the necessary conditions precedent to achieve regulatory approvals. While the revised agreement remains subject to regulatory approvals, we have been working constructively with regulators throughout this process.
As a result of this transaction, we anticipate that any funds we hold above our target surplus will first be used to fund delivery of the new strategy. Beyond this, we will assess a range of options with the intent to return capital above target to shareholders, subject to unforeseen circumstances.
We are also announcing a three-year transformational strategy to position AMP as a client-led, growth orientated business. Our new strategy will reinvent wealth management in Australia, tackle our legacy issues and position AMP Bank and AMP Capital for growth.
We believe that there is a significant opportunity to help meet our clients’ financial goals and provide solutions in wealth, banking and investment management – what we describe as ‘whole of wealth’ solutions. This brings together the best of our services from Australian wealth management, AMP Bank and AMP Capital.
Through AMP Capital, we will continue play to our strengths, including our expertise in real estate and infrastructure investment and pursue international growth opportunities, including through our joint partnerships.
We will also further localise our New Zealand wealth management business, as well as exploring options to divest this business.
And across AMP, we will reinvigorate our culture to be client-led, entrepreneurial and accountable.
Today we have also announced that we will raise capital through an institutional placement and a separate retail share purchase plan (SPP). Shareholders who are resident in Australia and New Zealand will have the opportunity to participate in the SPP purchasing up to A$15,000 of new shares. The offer will open on Friday 16 August and close on Thursday 5 September. Eligible shareholders will receive further details by email or post in the coming days. Information will also be available on our offer website ampspp.com.au
The Board has made the decision to raise capital to enable AMP to begin implementing its strategy immediately.
The Board and I are acutely aware that every action taken must reflect the long-term interests of you, our shareholders and owners of this business.
There is still much work to be done to drive this turnaround of AMP. However, with the strategy outlined today, we now have the foundations to do just that. AMP is bold and willing to face up to its past challenges in order to invest for a stronger and simpler future.
The Board, management and all employees will work tirelessly, for you, our shareholders, to restore the AMP brand and become a simpler, stronger and more successful business.
Chairman, AMP Limited
View a presentation by Francesco De Ferrari, CEO at: https://edge.media-server.com/mmc/p/sceafeve
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