(Refiles to correct day in 8th par)
* AMP reports 57 pct fall in underlying profit
* Targets second reinsurance deal for life insurance
* Announces A$500 million share buyback
By Jamie Freed
SYDNEY, Feb 9 Australia's biggest wealth
manager, AMP Ltd, on Thursday said it wanted to strike
a second reinsurance deal for its life insurance unit to reduce
its financial exposure to the troubled business.
The company announced a A$500 million ($381.95 million)
share buyback and kept its dividend steady despite posting a
worse-than-expected 57 percent fall in full-year underlying
earnings because it had released capital from a reinsurance deal
with Munich Re in October.
Australia's life insurers have seen rising claims rates and
more policy cancellations since Australian media in March last
year revealed the use of discredited methods to refuse
legitimate claims for insurance payouts.
AMP Chief Executive Craig Meller said life insurance was an
"area where we are looking to reduce our exposure".
“Our focus for the time being is on ensuring it delivers the
margins we have guided to and we continue to complete the
reinsurance arrangements that allows us to free up capital or
return it to our shareholders," he told reporters.
The next reinsurance deal would cover policies under the
National Mutual Life Association business it acquired from AXA
in 2011, he said.
Morningstar analyst David Ellis said he would not be
surprised if the deal released a similar amount of capital to
the A$500 million from the Munich Re transaction.
AMP shares were trading 3.4 percent higher on Thursday,
while the broader market was up 0.3 percent.
AMP reported underlying earnings of A$486 million for the 12
months ended Dec. 31, down from A$1.12 billion a year earlier,
including a A$415 million operating loss in its life insurance
The underlying result was below an average estimate of a 41
percent decline in underlying profit to A$633 million from 15
analysts surveyed by Thomson Reuters I/B/E/S.
On a statutory basis, which includes one-off items, the
company swung to a A$344 million bottom-line loss - its first
loss since 2003 - due to writedowns in its life insurance
business announced to the market in October.
While analysts say the wealth management sector's long-term
outlook is bright thanks to an ageing population and Australia's
compulsory pension savings scheme, the AMP result underscores
medium-term risks associated with the life insurance business.
Rival Suncorp on Thursday said it was considering "strategic
alternatives" for its life insurance division, including a
reinsurance deal, sale or partnership arrangement.
Meller is under pressure from the board to revive the life
insurance division and reverse a slide in market share.
He announced a shake-up of senior management in November as
part of that effort, and last month AMP closed its fledgling
venture capital arm to focus more on its core business.
($1 = 1.3096 Australian dollars)
(Reporting by Jamie Freed; Editing by Kevin Liffey and Stephen