Shares in asset management and insurance specialist AMP Limited (ASX: AMP) plunged 5% today after the group flagged a big fall in cashflows in its core Wealth Management division and more problems in its life insurance business.

For the quarter ending March 31 2016 the group posted net cashflows of $209 million, down from $342 million during the prior corresponding quarter in its Wealth Management division.

The poor result was blamed on shaky investor confidence as markets enjoyed a shocking start to 2016 dominated by worries over global deflation, China, rising US interest rates and commodity price falls.

At the end of the quarter total assets under management for its Wealth Management business were $112.6 billion, down 2 per cent from $115.1 billion at the end of 2015.

The group’s funds management division AMP Capital fared little better delivering net cash outflows of $1,540 million over the period – a result also blamed on shaky confidence after global equity markets posted one of their worst starts to a calendar year in living memory.

Insurance problems

The group’s Wealth Protection division arguably recorded the worst result of all though as it reported claims experience losses of $18 million. Wealth Protection is AMP’s insurance business that has been underperforming for a long time now as its core life and income insurance products suffer from lapsed policies and higher claims incidence.

In my opinion AMP’s management would be better off biting the bullet on this underperforming business by looking to sell it to concentrate on its asset management and other financial services businesses.

Just a couple of months ago Macquarie Group Ltd (ASX: MQG) sold its life insurance business Macquarie Life to Swiss insurance specialist Zurich Australia in a deal valued around $300 million.

The trend towards big mergers and acquisitions in the global life insurance sector is no coincidence as this is a tough market to grow profits in around the world. Other deals recently include Japanese giant Nippon Life acquiring an 80 per cent or $2.4 billion stake in the life insurance business of National Australia Bank Ltd (ASX: NAB).

I would not be surprised to see AMP look to offload its insurance business to an overseas giant in 2016, with the weaker Australian dollar providing additional impetus and global powerhouses like Zurich looking to grow into Australia.

This would be a good result for investors, although in the financial services space I would still prefer the faster moving and more agile Macquarie Group as an investment over the slow-moving AMP.

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Motley Fool contributor Tom Richardson owns shares of Macquarie Group Limited.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.