Financial analysts are unimpressed by the sale of AMP’s life insurance business, criticising both the rationale and financial benefits to the industry giant.

JP Morgan’s Siddharth Parameswaran says AMP is selling the business on the cheap, at an expected $2.17 billion after transaction costs and lost earnings are taken into account.

The estimated value of the sale to Resolution Life is $4 billion.

“It’s not clear to us why, with these metrics, management chose to proceed [with the sale], particularly given the businesses left include wealth management, which faced significant concerns from the [Hayne] royal commission,” Mr Parameswaran says.

The wealth management arm has seen investors run for the hills, losing $1.5 billion over the past quarter.

While AMP is the market leader by number of life policies, customer satisfaction has dropped below market average over the year, according to new Roy Morgan research.

And it suffered a $22 million claims experience loss in the third quarter, JP Morgan says.

One analyst told insuranceNEWS.com.au the sale is not unexpected, but the numbers are “nowhere near” what was anticipated.

AMP’s value as a group is much greater than the sum of its parts, he says.

The banking and wealth management businesses are under the royal commission’s spotlight and can no longer sit in the same entity, he told insuranceNEWS.com.au.

“As those businesses are pulled apart, there will be costs.”

S&P Global Ratings has maintained its negative outlook on AMP following the sale, saying the group’s credit profile depends on what shape it is in after the sale. It is not clear what AMP plans to do with the proceeds.

Morningstar says the royal commission has been an unprecedented disaster for AMP, and its long-term strategy after the sale is uncertain.

AMP will divest its New Zealand wealth management and advice business next year through an initial public offering. Management and staff in Australia are expected to transfer to Resolution Life.