Could a battered AMP be born again as a mutual?

We are surely near the end of AMP as we know it. This canʼt go on much
longer. In Mondayʼs session AMP sunk to a miserable $2.03: a new alltime
low. A takeover, a privatisation and even a re-mutualisation (yes
there is such a thing) must now look attractive to many insiders, as well
as long-suffering shareholders.

The outlook for this lame duck listed company is dreadful. As post Royal
Commission legal cases mount, new operators such as NetWealth are
quite simply running circles around it.

The AMP remains one of the most storied financial groups in Australia,
but just now the 170 year old mothership faces two emergencies.

First, the money is rolling out to industry funds. In fact, outflows from the
group are accelerating.

Second, the advisers are rolling out too and starting up afresh under new
licences, or quitting the industry entirely. Even so, AMP remains the
biggest player in the adviser network sector, with 2400 on the books,
even if 140 advisers headed for the exits last year.

No wonder the short traders are all over AMP, with no less than 8 per
cent of total stock held by hedge funds and related parties. As for stock
recommendation, there is not a single buy recommendation for the group
among the eight largest stockbrokers in Australia.

For older shareholders in particular, it must be galling to watch what was
once one of the most revered brands in the local market sink to such
lows. Moreover, many of the promises made to those investors at the
time of the de-mutualisation in 1997 – about how the group would be
more competitive and more efficient in raising capital – must now ring
hollow. (Demutualisation allowed mutuals to convert to private companies
and list on the sharemarket).

As it turns out, mutuals are far from dead. In fact, while AMP has been
slowly sinking, the Swedish insurer Skandia recreated itself across
Scandinavia in an elaborate series of corporate manoeuvres which have
turned it back into a mutual.

Certainly the concept of AMP relieving itself of publicly-listed status is
viewed with enthusiasm by key organisations within the group, including
the AMP Financial Planners Association. Its members have to deal every
day with the double trouble of a trashed share price and a reputation
badly damaged by the Hayne royal commission.

Could a re-mutualisation actually happen?

Insurance academic Ian Enright –who was the insurance adviser to the
royal commission says “itʼs feasible but complex”.

In reality, an external party would have to appear in the picture, providing
both capital and a mutual status. And that would require an awful lot of
risk capital.

Michael Pillemer, the CEO of PPS Mutual Australia, says: “Nobody could
have known losing mutual status at AMP was going to cost so much long
term. I expect anything is possible from here.”

Even just four years ago AMP shares were at $6.00: That price now
seems fanciful. A new research note from stockbroker Morgans says it
expects “tailwinds to persist in the medium term, including: a record level
of licensee and adviser movement”.

Either way, for investors, nothing the management – led by chairman
David Murray and CEO Francisco De Ferrari – has said or promised
seems to make the slightest difference. So the slide continues.

June 26, 2019