The AMP Limited (ASX: AMP) share price hit a new low of $2.32 today which is around a level not seen since back in 2003 when shares traded as low as $2.33. In 2007 before the GFC of 2008/09 hit, AMP shares traded above $10, but as of today, long-term AMP shareholders have little to show in terms of returns other than the dividend stream.
What’s gone wrong?
The share price fell 25% last Friday and is down 55% in 2018 alone thanks to a combination of mismanagement and the fallout from the Royal Commission that investigated some of the dubious practices across AMP’s financial advice, planning, and life insurance operations.
The fallout includes the group revealing its Australian Wealth Management business suffered $1.5 billion in cash outflows over the quarter ending 30 September 2018, which is the first quarter to reveal the effects of the reputational damage of the Royal Commission.
Fortunately for the group, investment markets over the quarter ending 30 September 2018 were actually relatively strong (prior to the big falls seen this October) which meant that total assets under management across its Wealth Management division increased to $579 million on a net basis to $132.6 billion.
However when you consider how October’s big market falls will have hurt this number you can see why many investors headed for the exits last week. Other asset managers such as Platinum Asset Management Limited (ASX: PTM) and Perpetual Limited (ASX: PPT) have also fallen in line with the market over the past month.
AMP has also announced it will sell its “Wealth Protection” and ‘mature businesses’ to general insurer Resolution Life for $3.3 billion, with plans to float on public markets its New Zealand wealth management businesses via an initial public offering in 2019.
AMP’s (acting) CEO appears to be implementing a turnaround plan that may be just getting started. “For shareholders, 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 commented.
The incoming CEO, Francesco De Ferrari, is a former Credit Suisse executive and as an external appointment has the mandate to implement the kind of radical overhaul that may be shareholders’ best chance of seeing a far better return on their investment over the next 15 years.
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Motley Fool contributor Yulia Mosaleva has no interest in any shares mentioned. The Motley Fool Australia owns shares of Platinum Investment Management Limited. 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 Scott Phillips.