More than $1 billion has been wiped off AMP's market capitalisation after the wealth manager announced a $668 million impairment due to "constant deterioration" in the insurance market.
AMP shares tumbled more than nine per cent after chief executive Craig Meller said the company expects to record about $500 million in capital losses and one-off items in the 2016 calendar year.
AMP will impair the value of its wealth protection business by $668 million and profit margins from the unit are expected to decline by about $65 million in 2017.
"We've seen consistent deterioration in the insurance sector over the course of 2016 and, despite the progress on claims transformation to date, it has significantly impacted the performance of our wealth protection business," Mr Meller said in a statement.
"Today's actions are designed to re-set the wealth protection business."
Those actions include a proposed reinsurance deal with Munich Re that will, from November 1, cover 50 per cent of AMP Life's $750 million annual premium income in its retail portfolio.
AMP said the agreement could release as much as $500 million in capital but would reduce the unit's profit margin by $25 million a year from 2017.
Mr Meller said AMP's policy of paying between 70 and 90 per cent of underlying profit in the form of dividends would remain unchanged, and the goodwill impairment won't affect underlying profit, which in 2015 was $1.12 billion.
Net profit, which rose 10 per cent to $972 million in 2015, is where the impairment will show.
Shares in AMP, which were as high as $5.96 in August, dropped 47 cents, or 9.1 per cent, to $4.68.
