AMP Ltd. swung to a net loss in the fiscal first half from a year earlier, and unveiled a new three-year turnaround plan that includes capital raising and potential asset sales.
The troubled Australian wealth management company posted a net loss of A$2.29 billion for the six months ended June 30 mainly due to due to a non-cash A$2.35 billion impairment charge. The company posted a net profit of A$115 million in the prior year.
The wealth manager has been dealing with the fallout from the banking royal commission that uncovered misconduct in its wealth advisory and superannuation businesses over several years. AMP's senior management and board was overhauled and the company is facing multiple lawsuits after the public inquiry.
The company said it has spent A$60 million to date on its remediation program and will accelerate in the second half of 2019. It expects A$708 million more in total future remediation costs to be paid.
Impairment charges aside, underlying profit for the half was A$309 million, down 37.6% from A$495 million a year earlier. Total operating earnings came to A$288 million, down 39.2% from A$474 million. Underlying investment income rose to A$55 million from A$52 million.
Looking ahead, AMP said its Australian wealth management will face a reduction in operating earnings of approximately A$85 million in 2019 due to the financial impact of unwinding internal distribution agreements. New Zealand wealth management and AMP Bank's earnings for the second half is expected to be in line with the first half.
New turnaround plan
AMP unveiled a new three-year plan to become a "simpler" business.
The strategy includes plans to divest its majority ownership in AMP Life to release capital, further localize New Zealand wealth management and explore options to divest. AMP expects to sell AMP Life to Resolution Life for a consideration of A$3.0 billion. The sale is expected to complete in the first half of 2020.
AMP also plans to fix legacy issues in Australian wealth management, including reshaping aligned advice and simplifying superannuation business.
To fund the new strategy, the company launched a capital raising program comprising of A$650 million institutional placement and a share purchase plan. The final placement price will be determined later. The placement will represent approximately 433.3 million new shares, or approximately 14.7% of AMP's existing issued capital.
The new shares are expected to be issued on Aug. 14. The placement is fully underwritten by Credit Suisse (Australia) Ltd. and UBS AG's Australia branch.
Meanwhile, AMP CFO designate John Patrick Moorhead has decided to leave the group to pursue other opportunities. James Georgeson, currently AMP's deputy CFO, will take over as acting CFO.