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    Bidder in the wings for AMP insurers
    By James Moore (Filed: 16/05/2003)

    A consortium of venture capitalists are working on a bid for AMP's UK life insurance businesses which could significantly alter the insurer's plans to float them off as part of a newly-listed company.

    The consortium is thought to be led by KKR, the US buyout specialist, and is working with a British management team. They have set up a vehicle known as Resolution Partners to be used for the bid, which could be worth as much as £1 billion.

    Their plan is to run off the businesses for cash along similar lines to the Life Assurance Holding Corporation, which is part owned by St James Place Capital and administers several life insurance funds. Resolution Partners would have a 10pc interest in the with-profits funds, which it would also administer.

    It is understood that KKR is working with Apax Partners and Warburg Pincus, the private equity houses. Two weeks ago AMP said it planned to spin off its UK businesses as a separately-listed group to be known as Henderson.

    Under the plans, Henderson would include the three closed with-profits life insurance funds of Pearl Assurance, NPI and London Life, which have 2m policyholders in the UK.

    It would also include fund manager Henderson; NPI's fund administration operation, unit linked insurance and independent financial adviser support businesses; Ample, the internet portal; and Towry Law, the independent financial adviser, along with half of Virgin Direct, the joint venture with Sir Richard Branson.

    AMP, at a stormy annual meeting in Australia, yesterday indicated that it had received approaches from potential buyers for NPI's non with-profits business, Ample and Towry Law. UBS Warburg is advising the insurer.

    KKR yesterday declined to comment on its plans but AMP is thought likely to view any bid with considerable interest. Its proposals would still enable Henderson to be spun off as a fund management operation with the sweetener of a contract to manage the life insurance funds.

    One source, with knowledge of the bid, said: "They have been working very hard on this. The problem they face, however, is that to get the returns the private equity houses would require they would either need to get the insurers at a substantial discount to net assets or use debt to finance the transaction. The Financial Services Authority may not be too keen on that."

    AMP had to inject £500m into life insurer Pearl to ensure it met regulatory solvency rules last year, and said problems with the UK operation were the major cause behind a loss of A$900m (£350m) in 2002.

    The company recently launched an A$1.5 billion rights issue and is hoping to raise a further A$750 million from its retail shareholders, who include 70,000 small investors in the UK.

    The rights issue was aimed at raising cash to put both the UK and Australian halves of the business on a firm financial footing ahead of the demerger, which is planned for the end of the year. AMP was also forced to write down the value of the UK operations by £1 billion and incur £100m of restructuring charges. It reduced the equity components of Pearl and NPI's life insurance funds to almost nothing.

    Yesterday Peter Willcox, chairman, admitted at AMP's annual meeting that the company had received "soundings" from parties interested in buying bits of the business but had yet to receive a firm proposal that could be put to shareholders.

    More than 1,000 people turned up at the firm's annual meeting in Sydney to vent their anger over the state of the company.

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