AMP (AMP) – Getting a win

AMP provides banking, super, and retirement services in Australia and New Zealand. AMP was founded in 1849 and is headquartered in Sydney, Australia.

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AMP (AMP) has agreed to settle a class action lawsuit over disputed superannuation fees and interest rates between 2008–20 for $122million, of which AMP will pay $75 million with its insurers covering the remainder. The wealth manager has received $44 million from some of its insurers to settle claims it had made for coverage of remediation program costs but talks with other insurers for them to pay out on AMP's policies remain afoot.

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This settlement allays Ord Minnett’s concerns over the superannuation class action, which we viewed as the most significant of AMP legal challenges, and, in fact, was a better outcome than we expected in terms of both costs and timing. This encouraging result means investors’ thoughts will turn to the potential for capital management given management’s previous conservatism as it focused on resolving outstanding legal challenges and setting the business up for growth after a long period of consolidation as it dealt with operational issues.

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On our calculations, AMP will have excess capital of almost $300 million by the end of CY25, which equates to circa 10 cents per share. Post the announcement, we maintain our target price of $1.95 but trim our recommendation to Accumulate from Buy on valuation grounds.

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