Wealth management company AMP yesterday advised that the proposed sale of AMP Life (the Australian and New Zealand wealth protection and mature businesses) to UK-based Resolution Life is highly unlikely to proceed on the current terms due to the challenges in meeting a condition laid down by the Reserve Bank of New Zealand (RBNZ).
This condition requires RBNZ approval of a change of control for AMP Life in a form consistent with the current branch structure.
In a statement, AMP says that Resolution Life notified AMP on 13 July 2019 that:
- RBNZ would not consider Resolution Life’s change of control application unless it agreed to have separate, ringfenced assets held in New Zealand for the benefit of New Zealand policyholders, which is inconsistent with the current branch structure;
- and as a result, Resolution Life does not expect RBNZ to approve an application that would satisfy the condition precedent.
AMP believes that this reflects RBNZ’s position and that addressing these requirements would adversely impact the commercial return of the sale for both AMP and Resolution Life.
The failure to meet this condition precedent is exceptionally disappointing as the sale of AMP Life is a foundational element of AMP’s strategy, the company says.
What's ahead
Recognising that the transaction is unlikely to proceed in its current form, AMP is now working with Resolution Life to determine whether there is a solution that addresses policyholder interests, regulatory requirements and provides certainty of execution. This will require negotiation of new terms and is not certain.
The interests of policyholders, both in New Zealand and Australia, have been and will continue to be paramount.
AMP says that there is a range of factors, both positive and negative, that would be taken into consideration in any future sale price. These factors include a A$400m charge to cover changes to best-estimate assumptions for life policies, and A$300m to cover the impact of the Protecting Your Super legislation.
If a revised transaction cannot be achieved on acceptable terms, 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.
AMP Life in NZ
According to a report in The Australian Financial Review, AMP Life has been treated as a branch office in New Zealand for 154 years. This gave the business a carve-out from the country’s capital rules for life insurance.
RBNZ is now taking back control of the prudential regulation of foreign-owned life insurance companies. In doing so, it will impose higher capital charges on life companies previously treated as branches. This means policyholders of AMP Life in New Zealand and Australia will have to bear the cost of higher capital charges being imposed on New Zealand life policyholders.