In the first half of 2019 AMP posted a $2.3 billion shareholder loss due to a non-cash impairment to write down goodwill in Australian wealth management and legacy issues.
The wealth giant has announced a $650 million fully underwritten capital raising which will enable it to set out on its new three-year transformational business plan.
The shareholder loss is a far cry from last year when the group posted a shareholder profit of $115 million but the wealth giant was still able to announce an underlying profit of the half year of $309 million.
However this profit was also a decline in the first half of 2018 where the underlying profit was $495 despite royal commission and client remediation costs and was short of initial forecasts of a $390 million underlying profit.
The capital raising, together with the sale of AMP Life to Resolution Life for $3.0 billion, will form the financial backing for the ambitious program announced by chief executive Francesco De Ferrari.
“The strategy we’re launching today repositions AMP for the future, there’s a strong need for what we offer across all of our spectrum. And we have the business model to capitalise on the significant industry disruption that’s occurring,” he said.
The strategy includes plans to reinvent its wealth management business to “help clients realise their ambitions” and will shift focus to direct-to-client channels and digital solutions.
The strategy will also integrate AMP Bank solutions with wealth management, grow AMP capital through differentiated capabilities and transform AMP culture to be client-led with effective management of financial and non-financial risk.
It is estimated that this program will cost between $1.0 billion and $1.3 billion said Mr De Ferrari with an element of that to be delivered by cost savings.
“To deliver the strategy, we are investing between one at $1.3 billion during the next three years, and of this investment, approximately a third will be spent on growth…a third of this to take cost out of our business. We’re going to spend the last third of this investment toward de-risking the business and addressing legacy issues,” he said.
According to AMP’s release $350 million to $450 million will be spent on growth, the same amount realising cost improvement, including a delivery of $300 million in cost savings by 2022 and a $350 million to $450 million investment in tackling legacy issues.
Mr De Ferrari said it was important that the balance sheet remains unquestionably strong and the capital raising would allow AMP to implement its strategy and continue growth.
“The capital raising and the AMP Life sale will provide the funds to implement immediately our new transformational strategy, which creates a simpler, higher growth and higher return AMP that’s focused on clients and ensures that our balance sheet will be unquestionably strong,” he said.
AMP also confirmed it was on track to complete its remediation program during 2021 with an initial estimate of $778 million including both aligned and salaried advisers.
The amount provisioned as part of total estimate has increased by $16 million to $672 million reflection lost earnings and program costs with $60 million spent to date.
AMP’s chief financial officer designate John Patrick Moorhead has confirmed he is leaving the role with James Georgeson, current deputy CFO being appointed to the role of acting CFO and will commence handover with retiring CFO Gordon Lefevre.
Mr De Ferrari also saw his remuneration adjusted to $2.45 million to reflect the share price of the group preceding his start date and the face value of his buyout incentive has decreased to $7 million from $10 million.
The board has also replace the recovery incentive with the new award to have a face value of $4.4 million, down from $6 million.
