AMP dives £890m into the red

TROUBLED financial services group AMP plunged to a record £890m loss in the six months to June after a £907m write-down of the UK business it hopes to spin off.

The loss was greeted with dismay by the market, with shares of the Australian-based giant falling 2.3% to A$4.61 in Sydney, even though analysts had been expecting a deficit of A$2.3bn (£950m) or more.

Critically for the future of the company's plans and of chief executive Andrew Mohl, AMP said its existing A$11.5bn of capital was enough to spin off the UK businesses.

That move is due this year with the group announcing it has hired Cazenove and UBS to help list the units, including Henderson Global, Pearl Assurance and NPI, on the London Stock Exchange. The float is expected to value them at up to £2bn.

Mohl said AMP's loss 'reflected the poor situation the company had encountered in its UK life operations in the face of a prolonged bear market and ill-timed acquisitions'.

He added: 'It's easy to lose sight of how much we have achieved in the last 10 months. It is also important to remember AMP's underlying businesses remain strong, with net profit before other items of more than A$300m in the first half.

'In our asset management arm, Henderson, the lagged effect of weak investment markets continues to impact the business, although it is well positioned for market recovery. UK Financial Services made a small operating loss in the half-year, but is transitioning quickly to a closed-book business with a strong focus on costs and management of balance sheet.'

A Sydney-based analyst said: 'The market knew the result was going to be awful, but in the end it was not quite as bad as thought. The crucial thing is Mohl says he will not need more capital.'

The company is seeking regulatory approval to separate its Australian operations from those in Britain, hammered by three years of decline in the FTSE 100 index which twice forced the company to make massive capital injections. The spin-off has so far racked up costs of A$344m.

Documents outlining the spin-off will be given to shareholders in October, with a meeting to vote on the proposal planned for December.

While Henderson Global Investors remains profitable, AMP has closed Pearl Assurance, NPI and London Life to new business. Even Henderson is suffering. First-half operating profit there fell 39% to A$62m with funds under management declining 8% to £69.4bn.

Underlying profits in AMP's Australian life business were also down. Operating profit there fell 9% to A$172m while the UK life units lost A$18m.

Mohl, 47, took charge 11 months ago after Paul Batchelor, architect of the disaster, was fired. The company's value has tumbled from A$24.7bn when it first demutualised in June 1998 to A$7.2bn today.