The AMP Limited (ASX: AMP) share price is on watch today after the Australian wealth manager provided a business update in light of the growing impact of the coronavirus.
Capital position remains strong
AMP reassured the market that it remains in a strong capital position with sufficient liquidity on hand.
However, AMP has decided to withdraw its FY 2020 guidance, which was first released when it posted its full year 2019 financial results back in February.
AMP had previously forecast that total investment spend would amount to between $450 and $650 million in FY 2020. Adjusting for the AMP Life sale, FY 2020 underlying profit was expected to on a similar level recorded in FY 2019.
The timing of the current crisis hasn't favoured AMP, as it is in the midst of attempting to realign its strategy after difficult recent times.
FY 2019 was a very tough year for AMP, with the wealth manager reporting a net loss after tax of $2,467 billion. One factor that particularly hurt AMP was its Australian wealth management segment, which reported a revenue drop of 50% on the prior corresponding period to $182 million as the company tries to restructure and repair damage after the fallout from the banking royal commission.
Three year transformation strategy continues
AMP emphasised today that it remains committed to implementing its 3-year transformational strategy, with the aim of evolving into a simpler and leaner business. As reported in February, this strategy includes investing a further $100 million in risk, governance and controls in FY 2020, and the transformation to a simpler superannuation offering.
AMP has had no choice but to implement this strategy, as the wider financial services industry evolves to a model which is less dependent on expensive financial advisors for products such as superannuation and managed investment funds. In particular, over the past 5 years there has been an increasing number of Australians moving their superannuation from more expensive retail funds to industry super funds, which generally have lower fees.
AMP confirmed today that the sale of its AMP Life division remains on track to be completed by 30 June this year.
AMP also noted that it has been continuing with the divestment of its wealth management arm in New Zealand, and it will be providing an update on its progress during or before its financial results release for FY 2020. The wealth manager also revealed that it's on track to complete its client remediation program by the end of FY 2020, with 80% of the program completed so far.
In addition, AMP is continuing to enact its business continuity plans in light of the escalating coronavirus crisis to ensure that client services remain available throughout the period of the crisis.
