AMP and AXA merger has hurdles to clear

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Plans to bring together two of New Zealand's largest insurance and investment businesses won't be finalised until March and will likely take much longer to put in place.

A binding agreement between AMP and AXA Asia Pacific to merge its Australian and New Zealand business was signed this week, but AMP Financial Services NZ managing director Jack Regan says integration planning won't start until after Christmas.

Regan said AMP had spent the last couple of weeks working through the details of the A$13.3 billion ($17.13 billion) deal and would now be undertaking due diligence to ensure the AXA business met its expectations.

In New Zealand the combination will create a company with about 700 staff, 700 advisers and 700,000 customers.

It will also have about $7.5 billion of retail funds under management.

Regan said the merged company would also have around 100,000 shareholders which, outside of Telecom, would make it one of the most widely held shares among New Zealanders.

He said the deal was expected to bring A$120 million worth of savings across Australia and New Zealand but he could not give a breakdown of how much it would save in New Zealand.

"We have got our own estimations, but more details will come out after the due diligence - we will know more in two weeks."

The deal already has permission from competition watchdog the Commerce Commission but more approvals must be gained in both New Zealand and Australia.

A vote for AXA's minority shareholders was expected to take place in late March and the deal must also be reviewed by the Takeovers Panel and Overseas Investment Office in New Zealand.

It is hoped the transaction would be settled early in the second quarter of next year.

Regan said some job losses would be inevitable across the combined businesses.

"Trying to be specific about what parts of the business will be affected - it's a little too early to say."

That planning would take place in the first quarter of next year, he said.

But having two financial adviser businesses would not mean getting rid of one.

"One of the things we find attractive about AXA is its distribution and multi-branded business models."

AMP advisers were largely self-employed and there would be no impact on that model.

"At this stage we are not advanced in the integration planning, but there is a lot to get your mind around."

The AXA brand would eventually be withdrawn from the market but that decision and the timing of it would be made by AXA SA, which is buying the business in conjunction with AMP.

The company would also review its product ranges over time.

But Regan said he hoped the merger would allow the combined businesses to compete with the banks and offer more products eventually.

"The opportunity to put two organisations of quality and size together will create an organisation that has the capacity to compete with the banks."

Regan said the banks had a very dominant position in New Zealand, with around 60 per cent of the life insurance market and the lion's share of wealth management.

"Hopefully a strong non-bank will be able to compete with that."

AMP already offered home mortgages through its Roost business and it would consider other products like cash PIEs with the combined greater distribution.

"We think there are areas we can look to offer a stronger base of competition."

THE PLAYERS

AMP
* 350 employees.
* Head office: Auckland.
* 335 advisers.
* $3.5b in retail funds under management.

AXA
* 322 employees.
* Head office: Wellington.
* 330 advisers.
* $4b in retail funds under management.