New Zealand Reserve Bank Sabotages Sale of AMP Life

According to AMP, the sale of its life insurance business is "very unlikely", due to the difficulties in meeting the requirements for approval by the New Zealand Insurance Supervisory Authority, the Reserve. Bank of New Zealand.

The financial services company announced in October 2018 its intention to sell its Australian and New Zealand life insurance business to Resolution Life for A $ 3.3 billion while splitting its wealth advisory and wealth management business into New Zealand.

But today, the company said Resolution Life had notified it Saturday that the Reserve Bank would not consider Resolution's request for a change of control unless it agreed to hold separate badets in New Zealand. reserved for the benefit of the policyholders of New Zealand.

"Therefore, Resolution Life does not expect RBNZ to approve an application that meets the prerequisite."

In a statement, AMP said the breach of this prerequisite was "exceptionally disappointing", the sale of its life business being the key to its strategy.

"Recognizing that it is unlikely that the transaction will continue in its current form, AMP is now working with Resolution Life to determine if there is a solution that meets the interests of policyholders, regulatory requirements and ensures the security of execution.

"This will require the negotiation of new terms and is not certain."

AMP stated that subscribers' interests, both in New Zealand and in Australia, have been and will continue to be paramount.

"The AMP Limited Board of Directors will review any revised transaction to determine if it is in the best condition.
interests of the insured, the company and its shareholders.

"If a revised transaction can not be completed on acceptable terms and must receive regulatory approval, AMP will retain AMP Life and manage it as a specialized life insurance and a mature business, with a focus on results. for the insured, the costs and the efficiency of the capital. "

The Reserve Bank stated that it remained "constructively engaged" with both AMP and Bermuda-based Resolution Life and "maintained a clear focus on subscribers' interests while meeting regulatory requirements". ".

Deputy Governor and Chief Financial Officer Geoff Bascand said the RBNZ's oversight responsibilities, set out in the Prudential Supervision of Insurance Act, have not changed since the signing of their contract by AMP and Resolution in 2018.

"In reality, the commercial terms of the contract can not be satisfactorily met" and the terms of this contract have been agreed "without regard to the requirements of the Reserve Bank".

The sale was part of the radical restructuring changes announced by AMP last October, which also included NZX's proposed float on wealth management in New Zealand. AMP had previously stated that the float would be postponed until the conclusion of the sale of life activities to Resolution Life.

This decision was made as a result of overwhelming revelations by the Royal Australian Commission on Financial Services, including charges against deceased and others for services never rendered and the fact that the company had misled its regulator, resulting in a series of resignations from boards and senior management.

AMP shares, listed on both the ASX and the NZX, have fallen more than 50% since the revelation of these revelations last March.

ASX trading has not yet opened, but shares fell 1 cent to 2.22 NZD on NZX for a negligible volume.

A report released in January this year by the two life insurance regulatory authorities in New Zealand, the Autorité des marchés financiers and the RBNZ, made a number of damning conclusions about the sector, including the fact that that he is vulnerable to mistakes, unaware if his products are appropriate. customers and is slow to make changes.

In particular, regulators note that about 25% of New Zealanders, who pay annual premiums of $ 2.57 billion, go to agents' commissions, much more than in other countries – Mexico and Hungary come in second place with 15% and Australia with about 12%. and about 9% in the United States.

AMP has stopped selling new life insurance policies as of January 1 of this year, before the sale of this business.

AMP said that given the uncertainty surrounding the AMP Life transaction, it would also not pay an interim dividend for the first half of its fiscal year in 2019.

additional BusinessDesk reports.