The sale of AMP Life is expected to be done after the market closes next Tuesday, June 30 after the deal was ticked off by the Reserve Bank of New Zealand on Tuesday.
That’s an important approval because the RBNZ killed off the first attempt by AMP to sell the life business to Resolution Life, a UK insurance investor, and bottom fisher.
The sale of AMP life insurance arm to Resolution needed approval from regulators in Australia, NZ, and China to proceed, given it involves assets from these countries.
AMP partners with Chinese wealth manager China Life and has established two joint ventures in pensions and asset management.
AMP needed the tick-off from China to transfer its life insurance holdings from one of these ventures to AMP for the sale to be complete.
AMP will now receive $2.5 billion in cash and $500 million in equity in a new holding company that will own AMP Life once the sale goes through at the end of the month.
The equity interest will give AMP around 20% stake in Resolution Life Australia, under the agreement negotiated last August. AMP will provide a full update to the market on July 1. June 30 is the end of the AMP’s first half of its 2020 financial year.
AMP shares jumped nearly 8% yesterday on the news to end at $1.905.
In its announcement on Tuesday, the RBNZ said special conditions had been put in place to win its approval.
“Because AMP Life is a branch of an Australian business and intended to be in ‘run-off’ and not write new business, special arrangements were needed for the security of New Zealand policyholders,” RBNZ’s Deputy Governor and General Manager for Financial Stability Geoff Bascand said in the statement.
“A bespoke trust model has been established that ensures supervisory objectives are better met, future industry dynamics are generally more positive, and there is additional protection in the event of insolvency – one of the key risk considerations that we have been seeking to mitigate,” Mr. Bascand says.
The Trust is required to hold capital and assets in New Zealand that help provide long-term security for policyholder benefits or investments, where relevant.
The Trust will be under the management and scrutiny of relevant officers in New Zealand, who have appropriate influence and authority in respect of the New Zealand operations, for the purpose of securing equity across all policyholders.
In addition, the model will see the establishment of a new, locally incorporated insurer Resolution Life New Zealand (RLNZ). The RLNZ board will have a majority of New Zealand resident, independent directors. RLNZ will act as Trustee to the Trust and will effectively manage the assets held in the Trust.
AMP Life has also established a New Zealand Policyholder Advisory Committee. The Committee is a sub-committee of the AMP Life Board, and will include RLNZ’s independent directors. Its purpose is to provide advice to the AMP Life Board on matters relating to the interests of New Zealand policyholders.
In making its decision the Reserve Bank said it sought and considered advice from an independent actuary, and liaised with the Australian Prudential Regulation Authority (APRA).