AMP Limited has signalled the sale of its life insurance business has been thrown into disarray and may not proceed because of the position of the Reserve Bank of New Zealand.
The company has told the Australian Securities Exchange that the transaction for the sale of AMP Life to Resolution Life “is highly unlikely to proceed on the current terms due to the challenges in meeting the condition precedent for Reserve Bank of New Zealand approval."
It said that failure to meet this condition precedent was exceptionally disappointing as the sale of AMP Life was a foundational element of AMP’s strategy.
It said that recognising that the transaction was unlikely to proceed in its current, AMP was now working with Resolution Life to determine whether there is a solution that addresses policyholder interests, regulatory requirements and provides certainty of execution.
AMP said this would require negotiation of new terms and was not certain.
The company said that while the earnings impacts since 30 June 2018 from unwinding the risk sharing agreement in the current transaction were not substantial, the long-term valuation effect would have a more significant influence on any future price negotiation because of best estimate assumption changes since 30 June 2018.
It said there were a range of other factors, both positive and negative, that would be taken into consideration in any future sale price including the effects of the Putting Members’ Interests First Bill.
“The AMP Limited Board will review any revised transaction to determine if it is in the best interests of policyholders, the company and its shareholders,” the ASX announcement said. “If a revised transaction cannot be achieved on acceptable terms, and receive regulatory approval, AMP will retain AMP Life and manage it as a specialist life insurance and mature business with a focus on policy-holder outcomes, cost and capital efficiency.”