The for sale sign could soon be posted on AMP’s embattled life insurance business even though the poorly performing division has shown signs of improvement over the past few months.
The life insurance business was clobbered last year by a blowout in the number of claims and a general wariness on the sector prompted by the Commonwealth Bank’s CommInsure scandals.
AMP’s full-year financials were smashed after the life business was forced to take a $1.2 billion writedown. The company recorded a 2016 full-year loss of $344 million, its worst outcome in 13 years.
A strategy briefing early
last month showed the life insurance business was showing signs of a resurgence, which analysts said was a positive indication that an improvement was in the pipeline.
last month showed the life insurance business was showing signs of a resurgence, which analysts said was a positive indication that an improvement was in the pipeline.
DataRoom understands UBS, a long-time close ally of AMP, and Macquarie are working on a range of proposals under which the wealth management giant could offload the life business.
An AMP spokeswoman last night said the company did not comment on market speculation.
AMP chief executive Craig Meller told investors last month that life insurance was classified as being managed for “value and capital efficiency’’ or, in other words, assets that are not in favour right now.
Disposing of the business makes sense given that a number of financial services companies are looking to scale back on their diversified assets.
Life insurance businesses are also notoriously capital intensive and AMP is not expected to escape a toughening of capital rules by global regulators.
The timing of a potential deal is not yet clear but it makes sense the AMP board would be keen to get the life business in better shape before officially putting it up for sale.
A distressed business, as it was last year, is not going to attract top dollar and AMP is hardly going to give away the asset.
A potential buyer of AMP’s business could emerge from the $4 billion ANZ Wealth sale, which is heading towards the pointy end.
Bids closed last Friday and the Melbourne-based bank is going through about five bids lodged with ANZ’s adviser Goldman Sachs. ANZ is still considering an IPO of the wealth division but the public float market is not in the rudest of health right now.
The sale has been complicated by the fact that the buyer will have a white labelling agreement with ANZ. Essentially, the buyer will create the financial and wealth management products that will be sold under the ANZ’s brand. The products will be distributed through ANZ’s branch network.
An interesting point will be what happens to QBE’s agreement with ANZ. At the moment, most of ANZ’s insurance products are provided and managed by QBE but bear the bank’s brand.
The likely candidates to pick up the wealth business are thought to be Dai-ichi, MS & AD Insurance Group and Meiji Yasuda Life.
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