AMP Shares Sink 8% On Dividend, Takeover News

The AMP Limited (ASX: AMP) share price fell 8% today following news that it may scrap its interim dividend to shareholders with uncertainty over the Resolution Life takeover of its Life business.

AMP Share Price Over 12 Months

image show amp's share price down from $3.50 to just $2.15 in 12 months
Source: Google Finance

AMP’s ASX update comes after months of heartache following the Royal Commission into banking and financial services in 2018. The Royal Commission prompted the divestment of key assets such as the Life insurance business.

In 2018, AMP announced its plans to sell its Life insurance business to Resolution Life for around $3.3 billion, including $1.9 billion in cash. Some of this cash could be returned to shareholders as a dividend payment. The following video describes the process of paying ASX share dividends in detail.

Why Is AMP’s Dividend Under Threat? 

Today, AMP said it believes the Resolution deal is “highly unlikely to proceed”.

Why?

It seems the key issue for AMP and Resolution lies with the Reserve Bank of New Zealand and its regulatory approval of the deal. At its core, the deal needs to be approved by RBNZ and enable Resolution to keep the current ‘branch structure’, effectively exempting the company from certain regulatory conditions.

On July 13, Resolution told AMP the RBNZ would not accept its application unless it ringfenced the assets in New Zealand, benefiting its NZ-based policyholders.

AMP believes the determination would “adversely impact” the returns achieved by the takeover for both companies.

The two parties are still in talks to get the deal over the line but the consequences for AMP couldn’t be any clearer.

“The failure to meet this condition precedent is exceptionally disappointing as the sale of AMP Life is a foundational element of AMP’s strategy.” – AMP

“For shareholders, the agreement with Resolution Life and our exit from wealth protection and mature delivers important strategic benefits,” AMP’s acting CEO Mike Wilkins noted in today’s update.

“It substantially simplifies our portfolio, delivers certainty and frees up capital.”

What Now?

It’s hard to know exactly what will follow today’s update however one thing is for sure — it’s been a painful 1, 3, 5, and 10 years for AMP shareholders.

Frankly, if I held AMP shares — which I don’t — I’d cut my losses and replace the foregone dividend income with a diversified low-cost Australian shares index ETF.

Disclosure: At the time of publishing, Owen does not have a financial interest in any company mentioned in this article. 

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here or enter your email address below to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just enter your email address below and we'll send you the report right away.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just click the link below and enter your email address. We'll send you the report right away.

CLICK HERE TO GET THE REPORT

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

Keep reading:

General Financial Advice warning
The information on this website is general financial advice only. That means, the advice does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. Please read our Terms & Conditions and Financial Services Guide before using this website.

© Rask Australia 2020

Join 20,000+ smart investors

Join the Rask Australia mailing and we’ll send you free investment reports, podcasts, expert insights, investing courses, ASX news and lots, lots more. All free. 

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian-owned.

feedback-icon

What can we do better? Please give us us some feedback :)

We care about your experience, please let us know if you have any suggestions to improve our site.