AMP, banks in $20b asset dump
AUSTRALIAN financial institutions have divested, or are in the middle of off-loading, assets worth $20 billion as they reshape their businesses amid the scandals of the financial services royal commission.
AMP has become the latest financial giant to simplify its business model, announcing that it would sell its Australian and New Zealand life insurance operation to London-based insurer Resolution Life for $3.3 billion.
Shares in AMP plunged by close to 25 per cent on Thursday to $2.50 as investors savaged the embattled wealth management giant.
The rout came on a day when the ASX 200 fell into a correction, losing more than 10 per cent from its recent high.
Customers are abandoning AMP, and $1.5 billion has been yanked from its wealth division in the three months to September, it said on Thursday.
That is dramatically up from $243 million in the same period a year ago.
AMP has had a turbulent year in which it lost both its chief, Craig Meller, and chair Catherine Brenner amid accusations of misleading the regulator over an unfolding fee-for-no-service scandal.
In August, it booked its worst first-half profit in 15 years as it set aside cash to compensate customers it sold bad advice to, and it warned that people were withdrawing money following the royal commission hearings.
AMP acting chief Mike Wilkins on Thursday said the completion of the portfolio review was a step in reshaping the 169-year-old company as a simpler, more focused group.
"Our incoming chief executive officer, Francesco De Ferrari, has the mandate to transform AMP," he said.
"The outcomes from the portfolio review will create greater flexibility as he sets the new strategy for our simplified business portfolio."
AMP's move out of insurance follows similar sales of large units by the big four banks as they return to traditional lending and away from wealth management and insurance. The total amount divested, or being off-loaded, by major financial institutions has hit about $20 billion.
ANZ is in the process of off-loading about $4.47 billion of assets, including selling its life insurance business to Swiss giant Zurich for $2.85 billion and its wealth-management arm to IOOF for $975 million.
The Commonwealth Bank is getting rid of about $8 billion in assets, including looking for a $5 billion share market listing for its bundled wealth-management and mortgage-broking businesses, which include Aussie Home Loans and Colonial First State.
It has also sold its CommInsure life insurance arm to Hong Kong's AIA Group for $3.8 billion.
National Australia Bank is also planning to exit MLC Wealth, its wealth management and superannuation businesses, by the end of next year. That business is valued at $3 billion to $4 billion.
Queensland's Suncorp group sold its life insurance business to Japanese insurer Dai-Ichi Life for $725 million this year.
Australian lenders for 20 years have routinely cross-sold services such as financial advice to banking customers under a model known as "vertical integration".
In his interim report for the royal commission, commissioner Kenneth Hayne said that while vertical integration "promises the virtue of efficiency", problems seemed to occur.