AMP AMP Limited

   By Robb M. Stewart 
 

MELBOURNE, Australia--Australian wealth manager AMP Ltd. (AMP.AU) plans to slash its final dividend by more than 70% after detailing a sharp contraction in earnings as it absorbs further costs to cover customer compensation.

The company on Friday said it expects to pay a dividend of 4 Australian cents (US$0.03) for the second half of the year, a steep cut from the 14.5 cents paid a year earlier.

The drop, which AMP said recognizes the performance of the business, capital impacts and uncertainties in the operating environment, comes against an anticipated 96% fall in its full-year net profit to about A$30 million from A$848 million recorded for 2017.

AMP has been under pressure since it apologized in April for misconduct and failings in its regulatory disclosures that were revealed in a royal-commission inquiry into misconduct across the wider financial industry, including allegation the company misled a regulator over fees charged to customers for advice it failed to deliver. In the wake of that, AMP's CEO, chairman and several board members stepped down.

In late October, the company agreed to sell a portfolio of wealth-protection insurance and mature businesses and decided to sell its New Zealand wealth-management and advice businesses via an initial public offering. The company had been reviewing its assets since last February but stepped up its efforts the wake of the damaging revelations that emerged during in the probe, which is expected to hand its final report and recommendations to the government at the end of the month.

On Friday, AMP said it would book a further A$200 million provision for customer remediation efforts, covering the cost of the ongoing program and lost earnings. That adds to a range of items it had previously disclosed, including hundreds of millions of dollars in customer remediation costs for mischarged fees and inappropriate advice.

The company also will be hit by an about A$105 million operating loss for the Australian and New Zealand businesses it agreed to sell in the second half of the year. It said the deal remained on track to be completed by the end of 2019.

AMP further warned that earnings from its retained businesses were expected to be impacted by external market conditions this year and the regulatory environment, but added it retained a strong capital position that included a surplus of about A$1.6 billion above the minimum regulatory requirement. It affirmed plans to return the majority of the net cash from the agreed sale of its businesses to its shareholders, though said that was subject to unforeseen circumstances.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

January 24, 2019 17:38 ET (22:38 GMT)

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