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AMP share price on watch after posting $2.5 billion loss

The AMP Limited (ASX: AMP) share price is on watch today after the Aussie wealth manager reported a net loss after tax of $2,467 billion.

What could move the AMP share price today?

For the full year ended 31 December 2019, AMP had a self-described “year of fundamental reset”.

That was reflected in the group’s revenue, with its Australian wealth management segment reporting a revenue drop of 49.9% on the prior corresponding period (pcp) to $182 million.

AMP Bank saw earnings slump 4.7% to $141 million while the New Zealand wealth management segment’s revenue plummeted 17% on pcp to $44 million.

AMP Capital remained a strong performer for the group in what was otherwise a disappointing year, as segment revenue jumped 18.6% to $198 million.

The AMP share price is one to watch this morning after reporting a 31.8% drop in underlying profit to $464 million in FY 2019.

What about the Royal Commission costs?

Client remediation costs of $153 million hurt the bottom line after a $469 million expense in FY 2018. The Aussie wealth manager says its remediation program is on track to complete in 2021 with $673 million in expected total costs still to be paid.

One of the big items for AMP was $2,407 million in total impairments for FY 2019. The Aussie wealth manager wrote down goodwill on its Australian wealth management ($1,509 million) and AMP Life ($459 million) arms following a difficult year.

Despite disappointing share price performance, AMP does remain well-capitalised. The group has nearly double the Level 3 eligible capital required by regulators with $3,832 million at year-end.

One factor that could move the AMP share price this year is its divestment of AMP Life and New Zealand wealth management.

AMP says its life insurance arm is now operating as a standalone business as it works towards regulatory approval. The group is hoping to complete the sale by 30 June 2020 and assess capital management options.

The New Zealand divestment process is underway with further updates expected at or before its 1H 2020 results.

The AMP share price will be on watch in 2020 as it strives to implement new strategies. These include an additional $100 million in risk, governance and controls in FY 2020 and a simpler superannuation offering.

Did AMP provide an FY 2020 outlook?

AMP is forecasting total investment spend of $450 to $650 million in FY 2020. In terms of “controllable costs”, AMP is forecasting ~$810 million for FY 2020, excluding AMP Capital.

Adjusting for the AMP Life sale, FY 2020 underlying profit is expected to be flat on FY 2019. 

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. 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 Scott Phillips.

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