AMP warns investors of further UK write-offs

AMP, the financial services giant, yesterday got the go- ahead from shareholders to hive off its UK arm, but was less than optimistic on the prospects for its float in London this month.

Shareholders in the Australian company yesterday voted 97 per cent in favour of the demerger plan. But they were also told there is likely to be a further writedown on the value of the UK assets. These include Pearl Assurance, London Life, NPI, Henderson Global Investors, a 50 per cent stake in Virgin Money and Towry Law, the financial advisers. The group will be listed on 23 December as HHG.

The AMP board is currently estimating a A$2.5bn (£1bn) writedown for the UK assets, but Peter Willcox, chairman of AMP, yesterday said "this will be higher, if HHG trades initially below our valuation".

HHG has been given an embedded value of £900m by the board, but Mr Willcox yesterday warned that the market value of HHG on listing would be at a discount to this. Many Australian investors, who will get one HHG share for every AMP share they own, will want rid of the businesses that have caused the company so much damage.

"Realistically we think there will be some volatility in the initial trading in both HHG and AMP, and there is potential for HHG to be undervalued by the market in its early days," said Mr Willcox.

HHG is using the opportunity of listing to raise £100m of new capital to help refinance the group. The City, however, so far looks unconvinced of HHG's investment potential and is expecting hedge funds to round on the company.

"AMP has made it pretty clear it cannot wait to get out of the UK. It is running to the exit and the management has now effectively written a pre-flotation sell note in the stock. It is unlikely that there will be a queue of investors," Ned Cazalet, the independent insurance analyst said.

Some say the listing date has been carefully chosen to limit the damage from hedge funds, in the hope that many bankers and brokers will be on their Christmas break.

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