AMP, no longer a conglomerate, must focus on wealth

ANALYSIS

AMP Limited is now a banking, wealth management and platform company.

If you had asked industry pundits in 2017/18 what elements of AMP they considered would be most likely to be placed on the sales block, few would have suggested that both the AMP Life business and the core elements of AMP Capital would have been sold by the first half of 2022.

However, that is the reality. AMP Life is now owned by Resolution Life and the infrastructure and property elements of AMP Capital have been sold off to Dexus and the Digital Bridge.

And AMP chief executive, Alexis George knows that this has left her with a company which may have a challenging future but now has very deep pockets with which to meet those challenges.

The big question now for George and the AMP Board is whether they have the right strategy and personnel in place to turn what was a large conglomerate into a focused and profitable but much smaller wealth management business.

The question which will now arise in the minds of some of AMP’s competitors is how and where it will choose to grow in circumstances where the sale process of BT Financial Group is well-advanced and other acquisitions are possible.

With the exception of AMP Bank, there are now many more similarities between AMP Limited and the other big player in the wealth management space, Insignia Wealth.

The net capital impact for AMP Limited of the sale of the international infrastructure debt and equity platforms and the real estate and domestic equity business is estimated to be an increase of around $1.1 billion for AMP.

Speaking of the Collimate sales, she they had “realised significant value for shareholders”.

“Post-completion of the two sales, AMP Limited will be a far more focused entity, concentrated on driving our core banking and retail wealth businesses in Australia and New Zealand, with a core objective accelerating our strategy and increasing our competitiveness.

In a very real sense, the manner in which the Collimate Capital businesses were sold delivered an advantage to George and the AMP Limited board because it foreshortened what might have been a long, drawn out demerger process.

As the AMP statement to the Australian Securities Exchange explained, “the Board determined that, when evaluated against a demerger, the two transactions would deliver greater value and certainty.

Somewhat ironically, on the same day that AMP confirmed the sale of the remaining Collimate Capital business to Digital Bridge, Fitch Ratings published its assessment of Resolution Life which now owns the AMP Life business.

It will have surprised few in the life insurance industry that the ratings house delivered Resolution Life an ‘a’ rating, noting its recent proposal to acquire AIA Group’s Australian superannuation and investment book and the possibility of the environment being right for further acquisitions.