On 25 October 2018, AMP Limited’s (ASX: AMP) made an announcement regarding an agreement to divest its Australian and New Zealand wealth protection and mature businesses (AMP Life) and reinsure New Zealand retail wealth protection for total proceeds of A$3.45 billion. Following this news, the share price of the company decreased by 17.372 percent as on 25 October 2018.
AMP Limited is planning to exit its Australian and New Zealand wealth protection and mature businesses through a sale to Resolution Life for total cash and non-cash consideration of AUD$3.3 billion which is expected to complete in the second half of FY 2019. The company is also executing a binding agreement with Swiss Re to reinsure New Zealand retail wealth protection, releasing additional capital of up to AUD$150 million to AMP prior to completion of a sale. The significant capital release will strengthen AMP’s balance sheet and provide strategic flexibility. The exit from Australian and New Zealand wealth protection and mature will also significantly simplify AMP and its earnings profile. It will also enable the company to focus on its higher growth businesses of Australian wealth management, AMP Capital and AMP Bank.
On 25 October 2018, the company also released an update on third-quarter cashflows. The company reported that Australian wealth management’s net cash outflows have increased from AUD$243 million in Q3 2017 to AUD$1.5 billion in Q3 FY 2018 mainly due to weaker inflows while outflows remained at high levels in part following AMP’s appearances at the Royal Commission.
AMP Capital external net cash inflows decreased from A$616 million in Q3 2017 to A$521 million in Q3 2018. The External net flows were driven by equity raisings for AMP Capital’s flagship real estate funds and infrastructure debt and equity transactions in the US and Europe.
AMP Capital’s share of China Life AMP Asset Management, the joint venture with China Life, reported A$78 million in net outflows for the quarter reflecting the transitional phase for new regulatory reforms and challenging equity market conditions in China.
AMP’s total loan remained almost flat in Q3 2018 to A$20.1 billion from A$20.2 billion in Q2 2018 which shows the slowdown in credit growth, a period of conservative liquidity management and increased flows to the non-bank sector. The net cash flows of New Zealand financial services increased by 7 percent to A$81 million in Q3 FY18 from A$76 million in Q3 FY17. KiwiSaver’s net cash flows decreased from A$107 million in Q3 of FY17 to A$85 million in Q3 of FY18 due to increased competition and higher retirement withdrawals. Australian mature net cash outflows increased from AUD$356 million in Q3 F17 to AUD$431 million in Q3 FY18.
In the last six months, the share price of the company decreased by 18.47 percent as on 24 October 2018, traded at a PE level of 18.390x. AMP’s shares traded at $2.735 with a market capitalization of circa $9.72 billion as on 25 October 2018 (AEST 2:30 PM).
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