AMP Progressing with New Strategy, as Life Business Again Disappoints

Our fair value estimate for narrow-moat-rated AMP remains at AUD 1.95 per share, with the businesses that AMP is retaining, that is, Australian Wealth Management, or AWM, AMP Capital and AMP Bank performing as expected in 2019. The disappointment was the further capitalised losses in AMP’s life businesses. The life businesses, in the process of being sold to Resolution Life, were hit by additional capitalised and experience losses of AUD 176 million in the second half of the year, leading to a total of AUD 246 million capitalised losses for 2019. However, Resolution Life is responsible for all such losses from July 1, 2018, as part of the terms of the sale, and they don’t impact our fair value estimate. Management confirmed the sale is on track to complete by June 30 this year. The other feature of the result was the steep fall in earnings from struggling AWM as well as continued strong performance of AMP capital, both of which were expected.