The sale of the company’s life business is unlikely to proceed on current terms because of the challenges in meeting the Reserve Bank of New Zealand’s criteria. Credit Suisse notes this allows the buyer the opportunity to review its offer and potentially lower the purchase price by over -$1bn.
The broker believes the -$700m of embedded value piped off AMP Life in recent months highlights the earnings uncertainty and volatility in this business.
Hence, Credit Suisse suggests retaining the business will continue to be an earnings and capital risk and a drag on the share price. Neutral rating maintained. Target is reduced to $1.90 from $2.35.
Target price is $1.90.Current Price is $1.79. Difference: $0.11 – (brackets indicate current price is over target). If AMP meets the Credit Suisse target it will return approximately 6% (excluding dividends, fees and charges – negative figures indicate an expected loss).