AMP Says Rising Policy Non-Renewals to Cut Fourth-Quarter Profit

AMP Ltd. (AMP), Australia’s largest life insurer and pension manager, expects fourth-quarter operating earnings to fall by as much as A$65 million ($62.5 million) after higher-than-expected policy lapses.

AMP plans to raise loss assumptions for income-protection policy lapses to A$40 million to A$50 million and will increase insurance reserves resulting in an expected loss of A$15 million, the Sydney-based company said in a statement today. It’s lifting such provisions after lapses climbed to their highest level in a decade in February.

“AMP regards improving the performance of the Wealth Protection business as one of its highest priorities and continues to implement short- and medium-term actions to improve claims and lapse experience,” it said in today’s statement.

The company’s first-half underlying profit dropped by 10 percent due to increasing non-renewals, it said in August.

AMP, which has a dividend policy of 70-80 percent, will decide on the second-half payout in February. The assumption of policy losses was a non-cash item and wouldn’t reduce overall capital, it said in today’s statement.

To contact the reporter on this story: Narayanan Somasundaram in Sydney at nsomasundara@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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