AMP has pointed to increased cash flow and lower lapse rates over the first quarter of 2017 as evidence that its reinsurance and write-down arrangements of late last year have stabilised its life insurance business.
AMP stated that its cash inflows of $476 million for the first quarter of 2017 were on par with the corresponding period of 2016 which recorded $479 million in cash inflows. Outflows were, however, lower in 2017 at $209 million compared to 2016 ($248 million), with net cashflow $36 million higher in 2017 compared with 2016.
Annual in-force premium figures were also stable over the last quarter of 2016 and into 2017 declining by 1% from $1,964 million to $1,943, as individual lump by $15 million compared to individual income protection and group which declined by $4 million and $2 million, respectively.
Addressing the AMP Annual General Meeting, AMP Chief Executive, Craig Meller said the insurer considered market changes in the insurance sector as structural, not cyclical, and had changed its best estimate assumptions around the future level of expected claims which had created a one-off, capitalised loss of $484 million and a goodwill write-down in the order of $668 million.
AMP had also entered into a reinsurance agreement with a major global reinsurer Munich Re and consolidated the AMP Life and NMLA Life books, releasing $645 million of capital.
“These actions were taken to stabilise the insurance business and minimise future impact on group earnings from the division. Importantly, the Q1 results announced this morning demonstrate that the actions are working and that the insurance business is now performing in line with our revised assumptions,” Meller said.
