AMP Limited provides Q1 18 update

From

Highlights:

Mike Wilkins

  • Cashflows subdued in Australian wealth management (AWM); continued strength in AMP Capital and AMP Bank.
  • AWM assets under management of A$128.3 billion at Q1 18, down 2 per cent from Q4 17, largely due to weaker investment markets.
  • AWM net cash outflow of A$200 million, in line with Q1 17, reflects subdued period of activity in superannuation following non-concessional contribution cap changes in 2017.
  • Strong net cashflows on AMP’s North platform at A$1.2 billion, up 14 per cent on Q1 17.
  • AMP Capital net external cashflows of A$1.6 billion driven by strong cashflows in real assets.
  • AMP Bank’s total loan book up 2 per cent to A$19.8 billion during the quarter.
  • Portfolio review of manage for value businesses continues.
  • In response to ASIC industry reports 499 and 515, AMP continues to review adviser conduct, customer fees, the quality of advice, and the monitoring and supervision of its advisers. We anticipate that this review will lead to further customer remediation costs and associated expenses. We will provide a further update at or before the 1H 18 results.

AMP interim Executive Chairman Mike Wilkins said: “The past month has been exceptionally difficult for our customers, shareholders, employees and advisers. We recognise there is a lot to be done to restore the public’s confidence in the company, which is a priority for the Board.

“AMP is a well-capitalised company with areas of our business delivering strong growth. AMP Capital saw strong external fund net flows particularly in real assets and AMP Bank continued its loan growth, despite a tighter market. Australian wealth management experienced cashflows in line with Q1 in 2017, as well as a small reduction in AUM following weaker investment markets.

“AMP stands behind its advice business, and the value it creates for customers. However, we have been very disappointed that, in some instances, our customers have not received appropriate levels of service for the fees they have paid. We are working hard to accelerate the remediation for our customers.

“We continue to progress the portfolio review, however we are currently prioritising the performance of the business, board renewal and the appointment of a new CEO.”

Commentary

Australian wealth management

  • Net cash outflows of A$200 million in Q1 18 in line with Q1 17. Inflows and outflows in Q1 18 were subdued due to reduced activity in superannuation following 2017 non-concessional contribution cap changes and volatile investment markets in the quarter.
  • AMP’s wrap platform, North, continued to perform strongly with cashflows growing 14 per cent to A$1,181 million in Q1 18.
  • Total Australian wealth management AUM at the end of Q1 18 was A$128.3 billion, down 2 per cent from Q4 17 reflecting negative investment markets during the quarter.
  • AMP’s SMSF business, SuperConcepts, added approximately 5,500 funds across administration and software services during Q1 18, supported by the acquisition of MORE Superannuation. The business now supports more than 64,600 SMSFs.

AMP Capital

  • AMP Capital external net cashflows were A$1.6 billion in Q1 18, an increase from A$228 million in Q1 17, driven by flows into real assets (real estate and infrastructure investments), and strong performance by China Life AMP Asset Management (CLAMP).
  • AUM increased from A$187.7 billion at the end of Q4 17 to A$188.1 billion in Q1 18. AUM now includes AMP Capital’s 24.9 per cent share of US-based real estate investment manager PCCP’s AUM.
  • AMP’s partnership with China Life continues to grow; AMP Capital’s share of CLAMP contributed net cashflows of A$462 million in Q1 18.
  • AMP Capital has A$4.5 billion of committed real asset capital available for investment.

AMP Bank

  • Total loan book grew to A$19.8 billion during Q1 18, up 2 per cent on Q4 17, supported by continued growth in loan books for both aligned adviser and mortgage broker channels.
  • Retail deposit book increased by A$321 million in Q1 18 relative to Q4 17.

Australian wealth protection

  • Australian wealth protection annual premium in-force (API) was down 1 per cent in Q1 18 to A$1,890 million. The small decline was primarily driven by a 1 per cent fall in API for individual lump sum.

New Zealand financial services

  • AMP New Zealand financial services’ net cashflows were A$54 million in Q1 18, up from A$23 million in Q1 17. The increase was mainly driven by lower cash outflows in retail investments.
  • AMP remains one of New Zealand’s largest KiwiSaver providers with net cashflows of A$47 million in Q1 18.

Australian mature

  • Australian mature net cash outflows in Q1 18 were A$323 million, compared to A$335 million in Q1 17, reflecting the run-off nature of the book. AUM declined 2 per cent to A$20.4 billion during the quarter.

Update on industry and regulatory compliance investigations

  • There are a number of reviews being undertaken by ASIC. These include industry reports 499 and 515 on financial advice. AMP is continuing its program of work to review the nature of ongoing service arrangements between its advisers and customers, and the incidence of inappropriate fees and advice, since 1 July 2008.
  • This program is ongoing, however we anticipate that the outcomes will lead to higher customer remediation costs and related expenses, as previously set out in our 2017 annual report. We also expect that enhancements to AMP’s control frameworks, governance and systems will be required.
  • We expect to provide further clarification at or before the 1H 18 results.

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