News: AMP Australia's AMP says insurance business sale unlikely to proceed, page-13

‘Heightened risk’ of AMP capital raise: Macq
Macquarie sees a “heightened risk” that AMP will need to raised capital to strengthen its balance sheet after warning that the sale of AMP Life is unlikely to proceed.
“In the absence of revised terms for the sale of AMP Life or sale of other assets (NZ Wealth ~$500m), we see a heightened risk of a capital-raise to strengthen the balance sheet,” the broker says.
“As we have previously highlighted we expect AMP to increase their advice remediation provisions (about $400m in our valuation), which could be the catalyst for such a raising.”
Macquarie notes that the original terms of the sale were for a total cash and non-cash consideration of $3.3bn, yet AMP have highlighted a $700m valuation reduction since the sale was agreed, plus the impact of needing to ring-fence assets in New Zealand.
It argues that given the discount to enterprise value already incorporated into the $3.3bn original consideration, it could be argued that part of the $700m was already incorporated, but the market is likely to take a more conservative view. And given the asset is to be held for sale, any earnings upside from a reincorporation of distribution agreements being unwound will not be factored in by the market.
AMP shares last down 16pc at $1.80 after hitting a record low of $1.772.