The AMP Limited (ASX: AMP) share price will be on watch this morning after the embattled financial services company provided an update on its AMP Life business and interim dividend.
What was announced?
This morning AMP revealed that the $3.3 billion sale of its AMP Life (the Australian and New Zealand wealth protection and mature businesses) to Resolution Life is highly unlikely to proceed on the current terms due to the challenges in meeting Reserve Bank of New Zealand (RBNZ) approval.
According to the release, the transaction requires RBNZ approval of a change of control for AMP Life in a form consistent with the current branch structure, which exempts AMP Life from a number of New Zealand legislative requirements.
However, Resolution Life has advised AMP that the RBNZ would not consider its change of control application unless it agreed to have separate, ringfenced assets held in New Zealand for the benefit of New Zealand policyholders. This is inconsistent with the current branch structure.
In light of this, Resolution Life advised that it does not expect the RBNZ to approve an application as things stand.
AMP stated that it "believes that addressing these requirements would adversely impact the commercial return of the sale for both AMP and Resolution Life" and that it "is exceptionally disappointing as the sale of AMP Life is a foundational element of AMP's strategy."
However, the two parties are working to determine whether there is a solution that addresses policyholder interests, regulatory requirements, and provides certainty of execution.
Management warned that this will require negotiation of new terms and is not certain. And if a revised transaction cannot be achieved on acceptable terms, and receive regulatory approval, AMP will retain AMP Life and manage it as a specialist life insurance and mature business with a focus on policyholder outcomes, cost, and capital efficiency.
As a result of the uncertainty around the AMP Life transaction, the AMP board has advised that it plans to continue its prudent approach to capital management and does not expect to pay an interim dividend.
This could make it worth considering dividend-paying bank shares such as Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) instead.
