The Reserve Bank of New Zealand (RBNZ) has effectively killed the sale of AMP Life to Resolution Life in its current form, after AMP failed to meet necessary preconditions.

The central bank warned Resolution last week it would not consider its change-of-control application unless it agreed to separate and “ringfence” AMP’s New Zealand assets for the benefit of New Zealand policyholders – a condition inconsistent with the current branch structure, which exempts AMP Life from a number of New Zealand legislative requirements.

Resolution informed AMP it does not expect the RBNZ to approve a change-of-control application that would satisfy that condition.

AMP says addressing these requirements would adversely affect the sale’s commercial return for both parties. It is now negotiating new terms with Resolution.

Its board has left the door open to keeping AMP Life as a specialist life insurance business “with a focus on policyholder outcomes, cost and capital efficiency” if it cannot negotiate a deal.

The RBNZ’s opposition will reduce the sale’s long-term valuation by about $400 million, based on best estimates, and cost AMP a further $300 million to implement group insurance legislation.

“The failure to meet this condition precedent is exceptionally disappointing because the sale of AMP Life is a foundational element of AMP’s strategy,” AMP said.