AMP has announced a series of new reinsurance agreements to release about AUS$500 million as part of a strategy to reduce capital held by the Australian wealth protection business, and to reduce future earnings volatility.
The new reinsurance arrangements include Gen Re and Munich Re increasing their reinsurance cover share, and the recapture of 35 of existing reinsurance treaties.
AMP Chief Executive Officer (CEO), Craig Meller, said; “In the first half, we’ve made good progress on the delivery of our strategy.
“In wealth protection, we’ve completed a set of comprehensive reinsurance agreements, which will release capital from AMP Life and reduce earnings volatility.
“We’ve continued to drive strong growth in the bank, growing above system while maintaining a conservative lending approach.”
A new quota share agreement with Gen Re will cover 60% of the National Marine Lenders Association retail portfolio, which was merged with AMP at the start of 2017.
In addition, Gen Re will help to manage risk and volatility in individual retail claims under a new surplus cover agreement.
Munich Re’s existing agreement to cover the AMP Life retail portfolio was extended to 60% from 50%.
AMP has simplified its overall reinsurance arrangements with the recapture of 35 existing reinsurance treaties, and the new reinsurance agreements come into effect from November 1st, 2017.
The carrier’s combined tranches of reinsurance, including those completed in 2016, will cover 65% of AMP’s retail life insurance portfolio.
Meller said the firm’s strong cost management was a step towards transitioning to a higher-growth, capital-light business with a more internationally diverse revenue profile.
He added; “In wealth management, we’ve delivered a solid performance, managing margin compression effectively and showing our strength as the market leader for superannuation during a period of heightened market activity due to MySuper transitions.
“And we’ve driven international growth with AMP Capital growing strongly and underlining its emerging reputation as a global leader in real estate and infrastructure investments with strong flows to these asset classes. Our partnerships in China are also performing well, growing both cash flows and assets under management.”