AMP chiefs leave as UK unit heads into emergency talks

The chief executive and chairman of the embattled Australian insurer AMP yesterday bowed to shareholder pressure and resigned from the group over their botched handling of solvency problems in its UK subsidiary Pearl Assurance.

Pearl may yet need more capital than the £500m AMP is ploughing in to the UK business to get it back above its solvency threshold. The group said last week that should the FTSE fall below 3,700, "the adequacy of these resources will be further reviewed".

The FTSE yesterday closed at 3,671 points, meaning AMP is now having urgent talks with the Financial Services Authority to assure the regulator that further steps are being taken to meet its solvency margin. The FSA may allow AMP to restructure £1.4bn of assets usually inadmissible in normal solvency calculations. AMP will also look at reinsurance and securitisation as a means to bolster Pearl's reserves.

Paul Batchelor, who has been running AMP since 1999, has seen A$2.3bn (£800m) wiped off the value of the company in the past week after revealing in a prospectus for a A$750m rights issue that Pearl was not meeting its regulatory capital requirements. The Australian regulator demanded a further explanation and trading in AMP shares was halted on Friday. Shares closed down again yesterday at a new all-time-low of A$11.29.

Statements from Mr Batchelor assuring the Australian regulator and investors that the group is still financially sound have failed to convince shareholders, which believe he should have disclosed the UK funding problem more openly.

His departure follows the sudden resignation of the group's finance director Marc de Cure, who is thought to have failed in a bid to take over running the company.

Tom Fraser, managing director of AMP's UK operations, is unaffected by yesterday's news. Andrew Mohl, the company's chief operating officer, will take over running the group until a new chief executive is found. The chairman, Stan Wallis, will oversee the appointment and leave within six months.

The Pearl fund has been drained of capital since it was bought by AMP in 1989 for £1bn. About £1bn of Pearl's surplus capital in its inherited – or 'orphan' – estate was attributed to the AMP group in 1997. The Pearl fund has been used to buy and support AMP businesses such as NPI, the fund manager Henderson Global Investors, financial adviser Towry Law and online investment supermarket Interactive Investor International.