amp rebounds

AMP rebounds
Aug 11 12:45
Damien Lynch




AMP moved to appease investors on Monday by insisting it is on target to achieve the demerger of its Australian and UK businesses by the end of 2003.

Shares rose as high as 3.6 per cent after the company also said its group earnings were "broadly" in line with guidance given in May, hosing down some concern in the market that the interim result on August 20 would include further nasty surprises.

The struggling funds management and life insurance group is expected to report a first-half loss of $2 billion in a result hit by $2.6 billion of asset write-downs and restructuring costs.

Further adding to the company's woes was a leaked audit report last week on internal systems at the UK arm of Henderson Global Investors which sparked an 8 per cent fall in AMP's share price.



The company also endured a reminder of its disastrous $3 billion hostile takeover of insurance group GIO on Friday, when a settlement was reached with disgruntled shareholders.

AMP will pay half of $112 million compensation for 23,000 shareholders who were given misleading advice by the GIO board.

The embattled life insurer and funds manager said in a statement to the Australian Stock Exchange on Monday that the eagerly awaited details of the demerger, including the proposed capital structures of the Australian and UK operations, were expected to be available from mid-October.

Shareholders will get to vote on the proposal at an extraordinary general meeting in December.

"The final capital structure for both new entities is yet to be resolved and remains subject to ongoing discussions with regulators," AMP's chief executive, Andrew Mohl, said.

"It will also be dependent on the outcome of asset sales, with the proceeds of any asset sales to be used to reduce the debt of new AMP [its UK operations]."

AMP said discussions with regulators - the Australian Prudential Regulation Authority and the UK's Financial Services Authority - about the proposed demerger were "well under way".

The group has appointed Rothschild to give an independent expert opinion on the explanatory memorandum on the proposed demerger, while investment banks Cazenove and UBS have been appointed in the UK to investigate to investigate the feasibility of an early London Stock Exchange listing.

At 12.35 AEST shares in the company were 8¢ or 1.8 per cent higher at $4.54, adding to 11¢ gained on Friday. Shares in AMP last week slumped to a record low of $4.26.

Mr Mohl said AMP was particularly concerned about persistent market speculation about the post-demerger capital structure of its Australian operations, and in particular its Reset Preferred Securities (RPS).

There has been concern in the market that $1 billion-plus in reset preference shares issued last year will be converted into equity. This would, in effect, be a capital raising and AMP had reassured the market it would not need any further capital raisings. It would also result in a lot more AMP shares coming to market and this could put the share price under further pressure.

Mr Mohl said a restructuring of the RPS as part of the demerger proposal was likely, but the group would only initiate any such move with the approval of its shareholders.

"In the event of the demerger not being approved, it is likely the RPS will remain as part of AMP's capital base as it will continue to be a relatively low cost form of capital," he said.

Mr Mohl reiterated that it had received "several approaches" for its troubled UK businesses but no proposal had been considered by the board.

"As stated in the June 12, 2003, demerger update, any formal offers will be given proper consideration and, if appropriate, brought to shareholders," he said. "Obviously, if this were to occur, the demerger proposal and related capital restructuring would not proceed."

South Africa's Old Mutual plc has been mooted as a potential buyer of AMP's UK businesses.