Why did AMP shares drop more than the ASX 200 in May?

It was a month of underperformance for the diversified financial business.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points
  • AMP shares dropped by 3.5% last month
  • The ASX 200 only declined by 3%
  • AMP announced a $24 million penalty during the month

The AMP Ltd (ASX: AMP) share price fell 3.5% in May — a slightly more painful decline than the 3% drop we saw with the S&P/ASX 200 Index (ASX: XJO) over the month.

It hasn't been a positive year for the wealth management company in 2023 to date – it's down by 13% following the hefty drop in February, as we can see on the chart below.

The ASX financial share didn't release any market-sensitive news in May, but there were a couple of pieces of news that might have had an impact on the AMP share price.

A young woman slumped in her chair while looking at her laptop.

Image source: Getty Images

ASIC proceedings concluded

First up, AMP noted the Federal Court decision as part of ASIC civil penalty proceedings relating to the deduction and retention of life insurance premiums and advice service fees from the superannuation accounts of deceased customers.

The Federal Court ordered that AMP Life and AMP Financial Planning be penalised A$24 million. AMP remediated 10,155 customer accounts approximately A$5.2 million in total, for the period from 2011 to 2019. This included compensation for lost earnings. The remediation was completed in May 2022.

This penalty has already been fully provisioned by AMP in its financial statements for the year to 31 December 2022, according to the company.

Many of these sorts of issues caused the started the decline of the AMP share price five years ago.

Simplified structure

In other news, AMP announced it was making some executive changes to "simplify and streamline" its business.

AMP advised that chief financial officer Peter Fredricson was retiring. The roles of chief financial officer (CFO) and group executive transformation would be consolidated with Blair Vernon appointed to the expanded role.

The company said Vernon would be responsible for leading financial and strategic activities across "financial control, statutory and regulatory reporting, performance reporting, tax, investor relations, treasury, mergers and acquisitions, strategic resourcing and workplace experience and transformation". He will also lead the balance sheet and cost base reviews announced in March 2023.

Vernon joined AMP in 2009 and was the chief executive of AMP Wealth Management in New Zealand in 2019.

A consolidated leadership role

The role of the chief executive of the Australian wealth management (AWM) division will be removed with a transition to a new operating model to occur by the end of the year. The AWM business will be dissolved.

The AMP chief executive Alexis George said about Vernon:

He is uniquely well-placed to take on the combined role of AMP CFO along with his existing role of Transformation, having played a major role in the simplification of the business. Blair has a strong track record of prudent financial management, delivering sustainable cost reduction, which together with his knowledge of the company will enable him to continue to drive the efficiency agenda.

A key focus for Blair will be delivering the capital management and cost base review, with that work already well advanced and on-track to be completed on or before our results update in August.

Foolish takeaway

It's likely the new simplified structure and leadership changes will influence the AMP share price in the months ahead.

Last month's RBA interest rate increase may also have impacted the AMP share price in May. It will be interesting to see what happens in June with increasing expectations of another interest rate hike.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

A man in his 30s with a clipped beard sits at his laptop on a desk with one finger to the side of his face and his chin resting on his thumb as he looks concerned while staring at his computer screen.
Broker Notes

Buy, hold, sell: Life360, Northern Star, and Sigma shares

Are these popular shares buys? Here's how analysts rate them.

Read more »

Business man marking buy on board and underlining it.
Broker Notes

6 ASX All Ords shares elevated to strong buy status after March sell-off

The ASX All Ords fell 8% in March after the US and Israel attacked Iran and oil and gas prices…

Read more »

Red buy button on an Apple keyboard with a finger on it.
Broker Notes

Brokers name 3 ASX shares to buy right now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Market News

Why Beetaloo, Fortescue, Orora, and Whitehaven Coal shares are dropping today

These shares are ending the week in the red. But why?

Read more »

Man in a business suit leaps off a boulder in front of a blue sky.
Share Gainers

3 ASX 200 stocks surging 13% to 36% in this shortened trading week

Investors sent these three ASX 200 stocks flying higher following the Easter break. But why?

Read more »

Three happy office workers cheer as they read about good financial news on a laptop.
Share Gainers

Why Amaero, Mesoblast, Telix, and Tivan shares are charging higher today

These shares are ending the week on a high. But why?

Read more »

A young couple stands next to a real estate agent in an empty apartment they are inspecting.
Real Estate Shares

Mirvac shares sink to their lowest level since 2015. Is this ASX property giant back on the radar?

Multi-year lows put Mirvac shares back on investors’ watchlists today.

Read more »