The company said 2018 second half profit had been hit by a range of problems, including “costs arising from the royal commission response, portfolio review, increased investment in risk, governance and controls, and advice remediation.”
AMP investors and Allan Gray chief investment officer Simon Mawhinney had concerns about how the company would rebound from here.
“In investing you shouldn’t dwell on the past you should dwell on now and future, for AMP that is the businesses that remains,” he said. “There’s no news in the outlook, and there remain a number of questions as to how they are going to offset the financial impact of unwinding the distribution arrangements.
“We remain unconvinced around their ability to offset the impact of unwinding the distribution arrangements…and look forward to meeting with the company to understand what is envisaged.”
The update – which triggered a 6 per cent fall in AMP’s share price on Friday morning – also gave more insight into the poor performance of its life insurance division, which the company sold for $3.3 billion to British-based Resolution Life and is due to complete in second half of this year.
The sale has incensed some investors, who argue that the company could have got a higher price and should have consulted shareholders before agreeing to the sale. Some of these investors plan to vote against chairman David Murray’s election at AMP’s annual meeting on May 2.
However, under the deal, Resolution Life will assume the risks and profit impacts from July 1 2018 after the deal completes. AMP said it was reserving $100 million of capital, which might be released after the sale completes, to reflect the higher than expected adverse claims. The company said the $105 million operating loss for the sold businesses in second half of 20178 reflected about $180 million of capitalised losses from AMP’s best estimate assumption changes and approximately $50 million of experience losses.
In the statement, the company firmed up its remediation provision to $200 million, pre-tax. This includes $186 million for running the remediation program.
The company reiterated it was retaining its “strong capital position” with $1.6 billion of capital above the minimum regulator requirements.
AMP will release its full-year financial results on February 14.
More to come.
from A Viral Update http://bit.ly/2B1mh9S
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