AMP (ASX:AMP) share price leaps 9% on life insurance sale

The AMP share price is on fire on Wednesday…

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The AMP Ltd (ASX: AMP) share price has been the best performer on the ASX 200 on Wednesday.

In early afternoon trade, the financial services company's shares are up 9% to $1.17.

Why is the AMP share price storming higher?

Investors have been bidding the AMP share price higher today following the release of a divestment announcement.

That announcement reveals that the company has agreed a deal with Resolution Life Group for its remaining 19.13% stake in Resolution Life Australasia (RLA).

According to the release, AMP will sell the stake to Resolution Life Group for a consideration of $524 million. Though, as part of the agreement, AMP and RLA have agreed to settle a number of post-completion adjustments and certain claims. This resulted in a net payment of $141 million to RLA from AMP.

And while this will mean an additional one-off expense of approximately $65 million in FY 2021, the deal ultimately strengthens AMP's available capital by approximately $459 million.

Management notes that this provides the company with further flexibility ahead of its planned demerger of AMP Capital's Private Markets business. That demerger is expected to complete in 2022. It will see the investment business pivot to become a separate, global private market investment manager and compete alongside some of the largest managers in the space.

AMP's Chief Executive, Alexis George, commented: "This divestment brings to a close our long and proud involvement in life insurance in Australia and New Zealand. It enables us to realise capital to further strengthen our balance sheet ahead of our demerger and continue supporting our businesses."

"The separation of our businesses is progressing well and will continue until mid-next year as planned. We will continue to provide transitional services to RLA, as agreed, and will have a shared customer and adviser connection into the future," she added.

The AMP share price is down 26% in 2021 despite today's strong gain.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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