It was expected to be a potential $3.3 billion cash injection, but now AMP's wealth protection and mature businesses portfolio is looking more like a dead weight.
The financial services provider announced the intended sale of AMP Life to New Zealand-based Resolution Life is "highly unlikely to proceed" as planned, due to challenges in securing approval from the Reserve Bank of New Zealand (RBNZ).
Resolution Life notified AMP the RBNZ would only approve a change of control application if Resolution Life agreed to have "separate, ringfenced assets held in New Zealand for the benefit of New Zealand policy holders".
Under its current branch structure, Resolution Life can't meet this condition.
"The failure to meet this condition precedent is exceptionally disappointing as the sale of AMP Life is a foundational element of AMP's strategy," said AMP in a statement to the ASX.
"Recognising that the transaction is unlikely to proceed in its current form, AMP is now working with Resolution Life to determine whether there is a solution that addresses policyholder interests, regulatory requirements and provides certainty of execution.
"This will require negotiation of new terms and is not certain."
The embattled bank first revealed its intent to sell AMP Life in October 2018.
AMP expected to sell for a total cash and non-cash consideration of $3.3 billion and at the time, CEO Mike Wilkins said the transaction would be a "major step forward in reshaping AMP as a simpler, more focused group".
"The agreement with Resolution Life and our exit from wealth protection and mature delivers important strategic benefits. It substantially simplifies our portfolio, delivers certainty and frees up capital," he added.
At its AGM in May, chairman David Murray said the AMP Life division had been a significant and ongoing challenge for the company.
"Our life insurance business has been challenged for some time, where structural changes in the industry and regulation globally have restricted our ability to compete on a sustainable basis and deliver acceptable returns to shareholders," said Murray.
"Since the sale agreement in October , our financial results have reinforced that AMP is not the best owner of a life insurance business with higher capital requirements and earnings volatility."
While its 1H19 accounts are yet to be finalised, AMP expects that it will not pay dividends for the half given the uncertainty around the AMP Life transaction.Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.
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