AMP to spin out NZ wealth management unit in IPO next year

AMP's initial public offering will be one of the biggest to hit the local sharemarket in some time. Photo / File

AMP could find it a "tough sell" to get investors interested in its New Zealand financial services business, says one broker.

The ASX-listed company which has faced reputational damage in the wake of damning revelations from the Australian Royal Commission, this morning announced plans to spin out its New Zealand wealth management and financial advice arm into an initial public offer next year.

Speaking after the announcement acting chief executive Mike Wilkins said it hadn't yet started the IPO process and did not have a date for a potential listing on the NZX.

He said it was possible AMP may need to hold on to some ownership of the listed entity in an escrow arrangement and the level of that would be determined by the market's demand and any conditions set by the stock exchange.

But getting the IPO off the ground may be a challenge.

Grant Davies, an adviser at broker Hamilton Hindin Greene, said it would be interesting to see what price it would be set at.

"It will be an interesting one. Obviously there is a bit of uncertainty in the markets in general and clearly that is not going to be helpful for a wealth manager."

The New Zealand share market has suffered from a lack of listings in recent years and Davies said if AMP managed to find the right price there would be space for that sort of company on the New Zealand market.

"It all comes down to price. It certainly will be a tough sell."

Other market players were reluctant to comment on the record.

One said it seemed like the New Zealand business had managed to avoid being tainted by issues in Australia but it could do with some TLC.

AMP is the fourth largest provider of KiwiSaver and has more than $5 billion invested via its scheme.

The IPO, which is subject to market conditions and regulatory approvals, would be one of the biggest to hit the New Zealand sharemarket in some time if it goes ahead.

AMP said the standalone business had financial year 2018 pro forma operating earnings of approximately AU$40 million.

The proposed IPO does not include AMP Capital Investors, which operates independently in New Zealand.

AMP Australia has also signed a binding agreement with reinsurer Swiss Re to reinsure New Zealand retail wealth protection which would see AU$150 paid out to AMP prior to the completion of the sale.

The agreement is expected to be effective from December 31 2018 and will cover approximately 65 per cent of the New Zealand retail wealth protection portfolio for new claims incurred from that date.

The reinsurance agreement was expected to reduce New Zealand profit margins by A$20m on a full-year basis which was being factored into Resolution Life transaction.

Blair Vernon, AMP New Zealand's managing director, said the company was a highly efficient, well-run business which had been a consistent contributor to AMP.

"A strong team with a history of consistent delivery for all stakeholders has prepared AMP New Zealand for this significant change."

He also moved to reassure customers of the financial services provider.

"Importantly, policyholders will retain all terms and conditions of existing policies, so there's nothing they need to do.

"There are no changes for AMP New Zealand's wealth management or general insurance clients, including members of the AMP KiwiSaver Scheme.