Inside Money: AMP takes AXA: a marriage by default

AMP and AXA - happy now, but sure to be some conflict later. Photo / Thinkstock

With the engagement now official AMP and AXA have only a few pre-nuptial agreements to conclude before setting a date for their much-anticipated wedding.

But, as with any late-life marriage, there is sure to be some conflict as the happy couple decide which pieces of their now-joint belongings to keep. Do we really need two George Foreman grills? How about your Val Doonican record collection - that's got to go.

Both AMP and AXA have an awful lot of baggage to sort through. And how are their kids, acquired from various past flings, going to take it?

As I recorded in a previous blog there probably hasn't been a lot of thought given at the corporate HQ about how the impending union will affect the respective New Zealand offspring of AMP and AXA - this is primarily, an Australian story.

But there are several New Zealand-specific angles to a merged AMP/AXA that are of interest. In particular, there's the burning question of what happens to the groups' KiwiSaver schemes post any deal. AMP and AXA are both default providers so a merger would inevitably reduce choice.

And there's no doubt that default status has given a leg-up to the six providers who have been appointed to the role - all of them are in the top 10 by member size and funds under management.

However, according to data I have compiled, default providers are also the most vulnerable to competitors.

While all six default providers grew their membership numbers in the year to March 31, 2010, ASB proved to be the only one able to staunch the flow of existing members out to competitors.

My research shows that AMP was the biggest loser with net transfers (which measures the gap between members transferring out to other KiwiSaver schemes and those shifting in from rivals) in the year to March 31 of about $24 million. ING (now OnePath) suffered a net transfer deficit of about $23 million over the same period followed by Mercer and Tower (both down about $21 million) and AXA at -$18 million.

ASB, by contrast, managed a net transfer gain of about $6.8 million - albeit with high volumes going in and out of its KiwiSaver scheme.

Despite this strong evidence of competitive pressure facing default providers, it's clear that a joint AMP/AXA KiwiSaver would - at least until new member flows dry up - give an advantage to its owner.

In that case, would the government appoint another default provider or simply let AMP/AXA double-dip in this free-money pool?

We may have to wait until the honeymoon is over to find out.