AMP has posted a loss as its insurance business tanks

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The insurance industry crunch has pushed AMP to a loss.

The Australian financial services giant today posted a full year loss of $344 million, a 135% drop on the $972 million profit of the year before, as its wealth protection insurance business runs down.

The underlying profit was $486 million, down from $1.12 billion in 2015 largely due to wealth protection losses of $415 million.

Revenue was up 5% to $14.799 billion.

The company also announced a capital return of about $500 million via on on-market share buy-back.

AMP’s shares were up 3.5% to $5.21 in early trade.

CEO Craig Meller last year described the insurance industry as on the nose. The company has been cutting costs and restructuring.

Today he told a media briefing: “It’s been a tough year.”

He says the year to December year saw strong results from AMP Capital, AMP Bank, New Zealand and a resilient performance from Wealth Management.

“However, these results were overshadowed by a poor performance in Wealth Protection,” he says.

“The wealth protection market deteriorated in 2016 and we took action to re-set and stabilise our business.”

These actions had a one-off cost of $484 million. AMP’s earnings were also hit by a $668 million goodwill impairment.

The AMP, like others in life insurance, has been hit by increasing claims. This has been fuelled by a rise in claims for depression-related illnesses and by an ageing customer base.

AMP also has a large number of older customers more likely to fall ill. Many of these also stop paying insurance as premiums get very expensive as they get older.

The company says it also deliberately reduced the number of its wealth advisers in 2016.

It didn’t give details or numbers but says a higher than usual number also decided to retire or leave the industry in the face of challenging conditions and increasing education and professional requirements.

The final dividend was maintained at 14 cents a share, franked to 90%, for a full year payout of 28 cents.

AMP’s 2016 results in detail:

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