AMP Ltd has advised that the sale of AMP Life to Resolution Life is unlikely to proceed on the current terms due to challenges in meeting the condition precedent for the Reserve Bank of New Zealand’s approval.
This condition requires RBNZ approval of a change of control for AMP Life in a form consistent with the current branch structure, which currently exempts AMP Life from a number of New Zealand requirements.
Resolution Life has notified AMP that RBNZ would not consider a change of control applications unless it agreed to have separate ringfenced assets held in New Zealand for the benefit of New Zealand policyholders.
This change would be inconsistent with the current branch structure and, as a result, Resolution Life does not expect for its application to be approved that would satisfy the condition.
Addressing the requirements is believed by AMP to adversely impact the commercial return of the sale for both AMP and Resolution Life.
The sale of AMP Life was a foundational element of AMP’s strategy in a move to simplify the operations of the group.
AMP had originally announced the sale for $3.3 billion, being made of $1.9 billion in cash, $300 million in preference shares and a $1.1 billion economic interest in Resolution Life.
An AMP spokesperson told Investor Daily that the group was focused on developing another solution that met all the right requirements.
“The focus is now on determining with Resolution Life if there is another solution that addresses policyholder interests, regulatory requirements and provides certainty of execution,” they said.
If no solution was found, AMP said that it would retain the business and manage it as a specialist life insurer.
“If a revised transaction can’t be struck, then we’ll retain AMP Life and manage it as a specialist life insurance and mature business with a focus on policyholder outcomes, cost and capital efficiency,” they said.
The AMP Ltd Board will review any revised transaction to ensure it is in the best interests of policyholders, the company and shareholders.
AMP said there was a limited earnings impact since June 2018 from unwinding the risk sharing agreement in the current transaction.
AMP will provide an updated strategy as well as how it would change AMP Life if it was retained by the wealth giant.
“AMP will provide an update on its strategy at our 1H19 results on 8 August. If AMP retains AMP Life, it will manage it with a focus on policyholder outcomes, cost and capital efficiency,” it said.
The group still expects to report a Level 3 eligible capital surplus above minimum regulatory requirements and in line with its target.