AMP has maintained its final dividend at 14 cents a share as it reported a huge, multi-million dollar loss and clean out of its life insurance business, plus a half a billion dollar share buyback that will effectively be financed by a higher reinsurance deal.
The steady dividend takes the total payout for 2016 to 28 cents a share.
That and the buyback is obviously aimed at keeping shareholders happy after the disaster that was 2016.
On a statutory basis, which includes one-off items, the company reported a $344 million bottom-line loss in the year to December 31, down from a $972 million profit in 2015.
Underlying profit fell 61% to $486 million, down from $1.12 billion, including a massive $415 million operating loss in its life insurance business.
The underlying result was far below market estimates around $633 million.
In October, AMP wrote down the value of its life business by $688 million and warned conditions in the industry had worsened further.
The company also announced a reinsurance deal with one of the world’s largest reinsurers, Munich Re, to cover 50% of $750 million of annual premium income as it seeks to “reduce the magnitude of earnings volatility" and release an estimated $500 million in capital.
The Munich Re deal will cut the already weak life business’s unit’s annual profit by $25 million from this financial year, but the AMP needs all the help it can get.
“The year saw strong results from AMP Capital, AMP Bank, New Zealand and a resilient performance from Wealth Management despite challenging market conditions,” AMP chief executive Craig Meller said in a statement yesterday.
"However, these results were overshadowed by a poor performance in Wealth Protection. The wealth protection market deteriorated in 2016 and we took action to re-set and stabilise our business.”
AMP said that the performance of Australian of its wealth protection, or insurance, business was impacted by negative experience and the actions made to stabilise the business led to a one-off capitalised loss of $484 million.
While assets under management were up by 5% to $121 billion in its Australian wealth management arm the impact of difficult trading conditions remained and saw total net cash flows drop to $336 million last year compared to $2.2 billion in 2015.
The buyback starts this quarter and that helped support the shares yesterday and they ended up 4% at $5.23 because there was o more bad news revealed in yesterday’s announcement.
