AMP Ltd. (AMP), Australia’s largest life insurer and pension manager, fell the most in four and a half years in Sydney trading after saying it expects first-half underlying profit to fall as much as 16 percent.
AMP shares dropped as much as 10 percent, the biggest since October 2008, and were 9.2 percent lower at A$4.52 at 10:13 a.m local time. The Sydney-based insurer said it expects underlying profit for the six months to June 30 of A$415 million ($384 million) to A$435 million, down from A$491 million a year earlier.
Insurance policy lapses rose to their highest level in a decade in the year ending Dec. 31, AMP said in February. It responded by increasing provisions for non-renewals and implemented a new claims management policy. It also plans to increase premiums, AMP said today.
“AMP is one of the companies facing structural and cyclical challenges,” said Andrew Adams, Sydney-based analyst at Credit Suisse Group AG (CSGN) said, referring to regulatory changes, rising claims and volatile markets. “They are doing what they can to address it. Insurance claims and policy lapses are something that refuse to go away. They have been impacting the whole industry.”
Credit Suisse said it would reduce AMP’s full-year earnings estimate by A$67 million following today’s announcement. It earlier expected AMP’s annual underlying profit to be A$1 billion, Adams said.
Wealth protection experience losses, which arise from higher-than-expected claims, were A$32 million in the five months to May 31, AMP said.
“AMP continues to implement actions announced at FY 12 financial results aimed at improving its claims experience over time,” it said in a statement today. “This includes new claims management policies, earlier intervention strategies and enhanced support to help customers return to work more quickly.”
The rest of the businesses were performing “in line” with market expectations, it said. AMP is scheduled to report first half earnings on August 15.
To contact the reporter on this story: Narayanan Somasundaram in Sydney at nsomasundara@bloomberg.net
To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net
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