Amp Sells Reinsurance Operation

Sydney Morning Herald

Wednesday December 12, 2007

Ross Kelly

AMP has made a healthy profit on the sale of its closed reinsurance and general insurance operation, which includes the Cobalt and Gordian businesses, to Bermuda's Enstar Group for $585 million.

Reinsurance is taken out by insurance companies to protect themselves.

The Cobalt and Gordian businesses were closed because they were no longer taking new customers.

Even so, they have recently been profitable businesses for AMP.

In the six months to June 30 their earnings more than quintupled to $78 million due to a favourable claims record.

But AMP said yesterday the offer from Enstar, a company listed on the Nasdaq market in the US that specialises in managing closed insurance books, was too good to knock back.

AMP said it would book a profit from the sale of about $83 million.

Under the terms of the sale, Enstar will assume the risks and benefits of the Cobalt/Gordian operations.

The sale will represent a complete exit from the business by AMP.

The outgoing AMP chief executive, Andrew Mohl said AMP had generated significant value from the run-off of Cobalt/Gordian in the past few years but the group had received attractive terms and conditions to facilitate its clean exit from the business.

"Cobalt has been well managed in recent years, generating solid earnings and releasing capital while being non-core to AMP's business strategy," he said.

"The sale of Cobalt/Gordian means that AMP is now fully focused on its core businesses of financial planning and advice, corporate and retail superannuation, retirement income and investment products, life insurance, banking and investment management, and is well positioned to continue to grow earnings and shareholder value in these areas."

The sale also will significantly reduce AMP's capital requirements, increasing the company's capital reserves by $157 million.

That reduction will allow the company to increase its next four dividend payments by 2c a share.

AMP paid a first-half dividend of 22c in October.

AMP shares had risen by 0.3 per cent to $10.57 by the close of trading yesterday.

AAP and Bloomberg

© 2007 Sydney Morning Herald

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