AMP Limited earnings results

8 August 2019

AMP Limited (AMP) posts $2.3bn loss on multi-billion dollar write downs

Results

• Wealth manager AMP Limited (AMP) posted a $2.29bn net loss for the six months to 30 June 2019. Underlying profit was a touch below Bloomberg consensus, slumping by 37.6% to $309m.
  

Drivers

• The half year loss was predominantly due to $2.5bn in one-off costs as the company undergoes a significant overhaul of its business. The one-offs included a write down of goodwill in its wealth management business and its AMP Life unit which it’s in the process of attempting to divest.

• Underlying profit can provide a more accurate look into AMP’s performance in a time of great change as it strips out these billion dollar significant costs. Underlying earnings fell substantially due to the impact of a 50% slide in its Australian wealth management profits and struggling life insurance operations. A solid 28% lift in profits from its investment management arm, AMP Capital boosted its bottom line.

• The highly anticipated sale of its life insurance business has been revisited after a $3.3bn deal fell through last month. Under a revised agreement UK group Resolution Life will pay AMP $2.5bn in cash and a $500m equity interest in Resolution Life Australia. While this is smaller than the prior deal on the table, the cash component of the purchase is $600m greater. Importantly this still needs regulatory approvals in Australia, New Zealand and China. A number of major brokers consider the sale of the unit as an important part of its turnaround strategy.

Dividend

• As flagged in mid-July, AMP will not pay investors an interim dividend this year due to delays in the sale of AMP Life. Investors already reacted to the news on 15 July when its shares slumped by 15% following the announcement.

Outlook

• AMP entered a trading halt to raise $650m from investors at a 13% discount to Wednesday’s closing price of $1.73/share. This will help pay for its three-year $1-$1.3bn transformation program unveiled today. The program is aimed at simplifying the organisation, reinventing its wealth management business, growing AMP Capital and separating itself from AMP Life

Share price

• AMP shares are down by a substantial 30% Year-to-Date however with the company currently in a trading halt, it is uncertain how investors will react to the messy result and the capital raising. Its shares remain near all-time lows and has been the hardest hit big name post Royal Commission on the ASX.

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