As I foreshadowed last year, 2019 was a year of transition for AMP. As a board, and as a company, we have taken
the necessary action to begin to address our legacy issues, in order to reinvent our 170-year-old business.
Our performance reflects the significant changes underway as we execute our new strategy, reposition the sale of AMP Life, address legacy issues, and navigate an increasingly complex regulatory environment.
The sale of our Australian and New Zealand wealth protection and mature businesses, now known as AMP Life, to Resolution Life is critical to AMP’s longer-term success. In August 2019, we announced a revised agreement to sell AMP Life to Resolution Life for $2.5 billion in cash, as well as a $500 million equity interest in Resolution Life Australia, a new Australian-based company controlled by Resolution Life.
This agreement replaces the original transaction with Resolution Life, which could not progress due to challenges in achieving regulatory approvals.
The board assessed a number of options but remains convinced that the sale to Resolution Life will deliver the best outcomes for our shareholders, policyholders and business. We continue to progress the transaction, which is expected to complete by 30 June 2020.
The company is dealing with a number of legacy issues including the remediation of clients of advisers who received inappropriate advice, or who paid fees where there was no evidence of services delivered. The program accelerated as we said it would in 2019. Total program spend to date, including program costs and money repaid to clients, is $264 million with $190 million paid in the second half of the year. The program remains on track for completion in 2021.
We commenced the program of board renewal in 2018 and were pleased to have the support of our shareholders at the 2019 AGM for the new directors. The new appointments to our board bring valuable insights to AMP as the industry navigates increasing regulatory, governance and risk obligations.
Turning to our more recently appointed directors, Debra Hazelton joined the board as an independent non-executive director in June 2019, bringing more than 30 years’ experience in global financial services, including roles as the local Chief Executive of Mizuho Bank in Australia and Commonwealth Bank (CBA) in Japan.
Rahoul Chowdry joined the board as a non-executive director in January 2020. Rahoul has 35 years’ experience in professional services, advising complex multinational organisations including Minter Ellison and PwC in Australia and overseas.
Michael Sammells joined the board as a non-executive director in March 2020. Michael brings more than two decades of experience as a CFO across private and ASX-listed companies. He is currently a non-executive director of Sigma Healthcare Limited.
We have also announced the retirement of three directors. Firstly, I want to acknowledge Mike Wilkins AO, who stepped down from the AMP Limited Board in February 2020. Mike has served AMP and its shareholders with distinction throughout his time on the board, particularly when he stepped into an executive capacity as interim Chairman and CEO at a deeply challenging time for the company in 2018. Mike will remain a non-executive director on the board of AMP Life until the completion of the sale of the business to Resolution Life.
Further, Peter Varghese AO and Andrew Harmos will also retire as directors at the conclusion of the AGM in May 2020. Andrew will remain a non-executive director on the board of AMP Life until the completion of the sale of the business to Resolution Life.
I would like to thank Mike, Peter and Andrew for their significant contributions to AMP over the past few years and wish them well for the future.
The business reported an underlying profit of $464 million for the year. This was 32% lower than underlying profit in 2018 and largely reflected the challenging conditions faced by Australian wealth management. The net loss attributable to shareholders for the year was $2.5 billion. This is due to a predominantly non-cash impairment of $2.35 billion (post-tax) taken in the first half to reset the business and support the new strategy. It is important to understand that this does not affect the financial stability of our business.
To ensure we maintained our capital position, and to enable management to begin implementing the new strategy immediately, AMP undertook a capital raising in 2019 through an institutional placement and a retail share purchase plan. We were pleased with the strong support from new and existing retail and institutional shareholders.
AMP remains well capitalised. Level 3 eligible capital above minimum regulatory requirements was $2.5 billion at 31 December 2019, up from $1.65 billion at 31 December 2018.
To maintain balance sheet strength and prudent capital management through a period of significant change, the board has resolved not to declare a final dividend in FY 19. This position will be reviewed after completion of the AMP Life sale.
AMP anticipates that any capital in excess of target surplus post completion will first be used to fund delivery of the new AMP strategy. Beyond this, AMP will assess all capital management options with the intent of returning the excess above target surplus to shareholders, subject to unforeseen circumstances.
In 2019, AMP announced a three-year transformational strategy to become a client-led, simpler, growth-oriented business. There is still much work to do to drive this turnaround but the foundations are now in place.