Why is the AMP share price on a high today?

Posted: 3 November 2021 12:51 pm

Shares in the wealth management giant have been largely unchanged in the last 6 months.

There is a buzz around AMP (ASX: AMP) shares, with the stock among both the most-traded and best-performer lists on the ASX boards on Wednesday. At the time of writing, AMP shares had surged 8.6% to $1.17 each.

What is pushing up the AMP stock price?

The latest share price move comes on the back of news that AMP has sold its remaining 19.1% stake in Resolution Life’s Australian business to the UK-based insurance group for $524 million.

The deal marks AMP’s complete exit from the erstwhile AMP life insurance business, in which it had sold an 80% stake to Resolution in 2020, for $3 billion. It also allows the troubled Australian wealth management giant to bolster its balance sheet ahead of a spin-off of its private markets unit.

"This divestment brings to a close our long and proud involvement in life insurance in Australia and New Zealand. It enables us to realise capital to further strengthen our balance sheet ahead of our demerger and continue supporting our businesses," AMP CEO Alexis George said in a statement to the ASX.

AMP said as part of the divestment agreement, both sides will settle post-completion adjustments and certain claims between the parties, which will result in AMP paying a net $141 million to Resolution Life. The group said it had partly provisioned for these items, but will record an additional one-off expense of $65 million in its 2021 accounts.

Restructuring on track

The life insurance exit comes at a crucial time for AMP, as it prepares to spin off its private markets investment arm AMP Capital – which manages about $50 billion in infrastructure and real estate assets and operates in markets across North America, Europe, the Middle East and Asia.

The demerger is scheduled to be completed in the first half of 2022 and remains on track, the company said.

"AMP is continuing to invest in the transformation and growth of its wealth management and bank businesses, as well as providing capital to support the growth of the Private Markets businesses and to continue actively defending its Real Estate business," it said.

AMP has faced persistent outflows since the Financial Services Royal Commission in 2018 found widespread misconduct at the company, which prompted the exit of senior executives and left the group struggling with top leadership issues since then.

AMP last month reported encouraging numbers for the September quarter. The company’s core Australian wealth management unit reported lower outflows and AMP saw better-than-expected returns in the market, while AMP Bank increased its loan book.

AMP is expected to provide further details on trading and its demerger at an investor day on 30 November.

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