SYDNEY: Australian wealth manager AMP Ltd said it would likely pull the A$3.3 billion ($2.3 billion) sale of its life insurance unit after the intervention of New Zealand's central bank, raising concerns about its recovery strategy and sending its shares tumbling.
Abandoning the deal would represent a set-back for the 170-year-old firm which had earmarked it as a way to simplify operations following a host of scandals at a public inquiry last year.
AMP said the buyer, Britain's Resolution Life, had told it the Reserve Bank of New Zealand (RBNZ) wanted it to create separate financial assets to protect policy holders in New Zealand, something which would hurt both AMP and Resolution Life.
"The failure to meet this condition precedent is exceptionally disappointing as the sale of AMP Life is a foundational element of AMP's strategy," AMP said in a statement.
It added that it would cut its interim dividend, given uncertainty around the deal.
AMP shares were down 14% at A$1.85 by mid-session, their lowest intraday level since the company listed two decades earlier. The broader market was flat.
"As a regulator, they're becoming a lot tighter in their oversight of those companies with international links to their economy," said Sean Sequeira, chief investment officer at Australian Eagle Asset Management, which holds AMP shares.
Others described the probable cancellation as an accidental win for AMP given that analysts had seen the sale price as too cheap.
"If anything, incrementally from a long-term value perspective this is positive," said Simon Mawhinney, chief investment officer at Allan Gray Australia.
The development extends a run of muscle-flexing by the RBNZ which has ordered New Zealand's major banks - most of them subsidiaries of Australia's big banks - to increase their reserve capital in recent months.
Last month, New Zealand's deputy prime minister called on the chairman of the local unit of Australia and New Zealand Banking Group Ltd (ANZ) to step down after the local chief executive abruptly left over an expenses scandal.
"The reality is, the commercial terms of the contract can't be met satisfactorily between AMP Life NZ and Resolution Life," RBNZ Deputy Governor and General Manager of Financial Stability Geoff Bascand said in a statement emailed to Reuters.
"The contract between AMP Life NZ and Resolution Life was agreed without consideration of the Reserve Bank's requirements."
Analysts have noted a spillover of regulatory scrutiny from Australia, with lenders ANZ and Westpac Banking Corp recently being pulled up by New Zealand regulators for governance and disclosure breaches.
Resolution Life did not respond to a Reuters email requesting a comment. - Reuters