Craig Meller

AMP Limited has reported a net profit of A$382 million for the half year to 30 June 2014^[1], down  3 per cent on A$393 million reported for 1H 13.

Underlying profit^[2] was A$510 million compared with A$440 million for 1H 13, up 16 per cent half on half, with double digit growth in operating earnings for all contemporary businesses.

The Board has declared a 9 per cent increase to the interim dividend to 12.5 cents per share compared with 11.5 cents per share for the 2013 interim dividend.  This represents a payout ratio of 73 per cent of underlying profit and is within AMP’s target range of paying 70-80 per cent of underlying profit.

Chief Executive Craig Meller said: “This is a solid result with 16 per cent underlying profit growth. We have made good progress on our strategy to be a leaner, more efficient and increasingly customer-driven organisation.

“We are continuing to transform our core Australian business with a market leading mobile platform launched^[3] and a new operating model in place to focus on the customer and to drive sustained growth as the Australian wealth industry doubles in size^[4] by 2022.

“It is particularly pleasing to see AMP’s offshore strategy already delivering good cashflows while building strong growth potential in the long term from partnerships with national champions in China and Japan.

“The wealth protection business is stabilising, with the improvement plan delivering encouraging results however, we have more work to do,” Mr Meller said.

Key performance measures

• Underlying profit: A$510 million in 1H 14, up 16 per cent on 1H 13.
• Cost to income: Controllable costs have been managed tightly with the rise in income more than offsetting a A$4 million increase in costs from 1H 13 to A$650 million.  The cost to income ratio was 45.0 per cent for 1H 14, an improvement of 3.4 percentage points on 1H 13.

Cashflows:

• AMP Australian wealth management net cashflows were A$1.1 billion in 1H 14, down A$267 million on net cash flows of A$1.4 billion in 1H 13.  Total retail net cashflows on AMP platforms continue to perform strongly, growing 39 per cent to A$1.6 billion in 1H 14.  These flows were partially offset by higher net cash outflows on external platforms of A$615 million.
• AMP Capital external net cashflows were A$1.6 billion, a A$3.7 billion turnaround from net cash outflows of A$2.1 billion for 1H 13.  This was driven by the new inflows generated by the China Life AMP Asset Management joint venture and improved flows from the MUTB alliance.

Underlying return on equity:

• Increased 1.3 percentage points to 12.5 per cent in 1H 14, reflecting the 16 per cent increase in underlying profit, partially offset by higher average capital.

“These results demonstrate the real strength of AMP’s business franchise, scale and operating leverage, when both investment markets and investor confidence are more positive,” Mr Meller said.

In wealth management, operating earnings for 1H 14 were up 16 per cent compared with 1H 13, reflecting increased investment related income from higher customer account balances, a strong rebound in net cashflows and good cost control in a growing business.

In wealth protection, operating earnings were A$91 million compared with A$64 million half on half reflecting the impact of management actions.  The volatile environment, claims and lapse experience were broadly in line with best estimate assumptions.

The life insurance sector continues to face both structural and cyclical change and a range of initiatives are underway to address these factors.  These include improved customer retention campaigns and additional resources to handle customer claims more effectively and to help income protection customers get back to work more quickly.

“Improving the performance of the insurance business remains a key area of focus as we introduce a series of actions to improve the management of claims and customer retention in order to deliver benefits to both our customers and shareholders,” Mr Meller said.

Other key highlights

• AMP Capital performed well: Operating earnings increased 12 per cent reflecting good fee growth, and a A$3.7 billion turnaround in external net cashflows^[5] from strong offshore partnerships.  The cost to income ratio of 62.4 per cent was well within the target range of 60-65 per cent.
• Fifth quarter of more than A$1 billion net cashflows on North platform: With net cashflows improving 27 per cent to A$2.4 billion for 1H 14, compared with A$1.9 billion for 1H 13.  North AUM increased A$2.6 billion to A$12.2 billion, up 27 per cent since December 2013.  Almost 20,000 new customers as a result of more AMP advisers choosing to recommend the North platform to their customers.
• AMP a market leading provider in wealth management: Number one market share in retail superannuation and pensions with 20 per cent, individual risk insurance with 18 per cent and in financial advice with 22 per cent of the market.
• Robust AMP Bank performance: The bank delivered A$42 million operating earnings, up 11 per cent compared with 1H 13, reflecting an increase in residential mortgages with AMP aligned advisers contributing almost a quarter of new business in a period of intense competition.  Lending growth was supported by continued deposit inflows which were up 6 per cent on 1H 13.
• New Zealand achieved strong growth in profit margins: Operating earnings of A$55 million, up 20 per cent compared with 1H 13, reflects solid business growth, a currency benefit and good cost control.  Cashflows reflect the continued success of KiwiSaver, driving KiwiSaver AUM up 9 per cent to A$2.9 billion.
• Corporate Super wins: 16 new SME and large corporate mandates in 1H 14 to transition over the next 6-12 months
• Adviser numbers stable in a changing regulatory environment: AMP’s adviser network remains the largest adviser network in Australia with 3,860 financial advisers, up 2 per cent on FY 13.

Capital management

AMP continues to hold an appropriate capital surplus, with A$1.9 billion capital above minimum regulatory requirements at 30 June 2014, down from A$2.1 billion at 31 December 2013.  The decrease was largely driven by the redemption of AMP Notes.

AMP maintains a strong balance sheet, with little change to gearing and interest cover, and has access to significant liquidity.

AMP continues to offer a DRP to eligible shareholders, no discount will apply to the allocation price.  Shares will again be bought on market and the dividend will be 70 per cent franked with the unfranked amount being declared as conduit foreign income.

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AMP also announced that Mr Simon McKeon AO will become the Chairman of the AMP Limited Board in May following the planned retirement of Peter Mason.

Simon McKeon joined the AMP Limited Board in 2013. He is a member of the Audit Committee and a Director of AMP Capital Holdings Limited. He is also the Chairman of CSIRO and holds a number of not-for-profit directorships.

The Board of AMP Limited thanked Mr Mason for his outstanding contribution to AMP over the last decade and paid tribute to his critical role overseeing a successful transition of CEO twice during his time as Chairman, his calm stewardship during the global financial crisis and the fruitful negotiations leading to the acquisition of AXA Asia Pacific Holdings Limited.

Mr Mason said: “It has been a great privilege to be the Chairman of AMP Limited, a company with a long and proud heritage that continues to make a real difference to people’s lives. During the tenure of this Board we oversaw the merger between AXA and AMP, which has delivered transformational change. The new AMP has significant scale and capacity, market-leading products and platforms, is number one in key market segments, has an expanded financial planner footprint and is well-positioned for growth.

“Succession planning has always been a key focus of the AMP Board and I am pleased that Simon McKeon will take over from me as Chairman when I step down after a full cycle of board renewal. The company and the Board are in very capable hands.”

Mr McKeon added: “Peter Mason has served and guided AMP through a successful expansion into Asia and a period of significant change in a challenging environment including the global financial crisis, substantial legislative and regulatory shifts and the merger with AXA.

“This phase of the board renewal process was timed to follow the smooth transition to the new CEO Craig Meller and the completion of the merger. We thank Mr Mason for agreeing to stay an extra year past his planned retirement date to oversee these important milestones.”

AMP Limited also advised Mr Rick Allert AO having reached the end of his three year term, has announced his intention to retire from the Boards of AMP Limited and AMP Bank Limited. Mr Allert joined the Board in 2011 following AMP’s acquisition of AXA Asia Pacific, where he was Chairman from 2000 – 2011 and a Director since 1992. The Board wishes to express its appreciation for Mr Allert’s contribution in providing continuity and insight from his deep experience in the sector.

As part of the board renewal process, AMP Limited further announced that Mr Trevor Matthews will join the AMP Limited Board as a non-executive Director, effective 3 March 2014.

Mr Matthews brings significant life insurance experience to AMP having held senior management roles in life insurance businesses in Australia and internationally over the last 30 years.

Mr Matthews is a qualified actuary who most recently was Executive Director and Chairman Developed Markets for Aviva Plc, based in London. Previously he was Chief Executive Officer, Aviva UK and has held a number of other senior executive roles with Aviva and other life insurers.

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Craig Meller

AMP Limited has reported a net profit of A$672 million for the year to 31 December 2013, compared with A$689 million for FY 12.

Underlying profit for FY 13 was A$849 million compared with A$950 million for FY 12.

Underlying profit benefited from strong growth in Wealth Management, AMP Bank, Mature and New Zealand, offset by the challenging life insurance environment and a decline in investment income on shareholder funds.

The board has declared a final 2013 dividend of 11.5 cents per share, the same as the 2013 interim dividend. This represents a full year payout ratio of 80 per cent of underlying profit and is within AMP’s target payout range of 70 to 80 per cent of underlying profit.  The dividend will be 70 per cent franked with the unfranked amount being declared as conduit foreign income.

Shareholders will be invited to participate in AMP’s dividend reinvestment plan (DRP) however no discount will be applied to the DRP allocation price and the shares will be acquired on-market.

The board reviews its approach to the DRP every six months as part of its review of AMP’s capital position.

AMP remains strongly capitalised with capital resources of A$2.1 billion above minimum regulatory requirements at 31 December 2013, up from A$1.7 billion at 30 June 2013, reflecting retained profits and A$325 million raised through the AMP Notes 2 retail subordinated debt issue.  Subject to APRA approval, it is intended that the 2009 issued AMP Notes of A$266 million be redeemed for cash in May 2014.

AMP Chief Executive Craig Meller said that while AMP has delivered strong underlying earnings growth across the majority of its business units, the result has clearly been impacted by the ongoing challenges facing the life insurance sector.

Excluding Wealth Protection, AMP achieved an average 15 per cent earnings growth across the company compared with FY 12.  This reflects particularly strong sales momentum in Wealth Management, improved net interest margin in AMP Bank, improved investment returns in the closed Mature business and strong cost management across the group.

Performance against key measures

• Underlying profit: A$849 million for FY 13, down 11 per cent compared with FY 12.
• Cost to income ratio: 49.4 per cent for FY 13, up from 47.3 per cent for FY 12[2] reflecting improved cost control offset by lower income, particularly in the Wealth Protection business. Controllable costs fell 2.6 per cent on FY 12. 
• Growth measures:
  • AMP Financial Services (AFS) net cash flows were A$1.3 billion, up fromA$308 million for FY 12[3] reflecting strong flows from the Australian Wealth Management business.

• AMP Capital external net cash outflows were A$1,039 million compared with net cash outflows of A$1,784 million in FY 12.  This improvement was largely driven in 2H 13 by strong inflows into infrastructure assets and a slow-down in Japanese net outflows.
• AFS value of risk new business was A$116 million, compared with A$203 million for FY 12, reflecting the challenging life insurance environment.
• Underlying return on equity: 10.7 per cent, down from 12.7 per cent FY 12[4] reflecting higher capital held to meet new prudential requirements, lower Wealth Protection profits and lower investment income earned on shareholder capital as a result of lower short-term interest rates.

Wealth Management, AMP’s largest business unit, delivered an increase in operating earnings of 16 per cent, reflecting stronger net cashflows and improved investment markets leading to 14 per cent growth in average assets under management (AUM).  Margins in the wealth management business declined 4 basis points to 121 basis points which is within AMP’s market guidance.

The life insurance sector remains challenging with insurance claims and policy lapses remaining at higher levels than the long term average.

AMP has undertaken a comprehensive review across all aspects of its life insurance business and researched global best practice, and as a result launched a series of initiatives that are expected to improve claims and lapse experience over the medium term.

“We’re already seeing the benefit of working more closely with our customers to help them get back to work after illness or injury, improving the financial outcome for both our customers and AMP. We’re also investing in new systems and data analytics that will improve claims management performance over the medium and long term.

“As market leader, AMP has the scale, capacity and executional capability to continue to deliver quality life insurance products that provide Australians with much needed security in a market that is changing.  And, we play an important role in helping people understand the fundamental difference life insurance can make in the lives of Australians,” Mr Meller said.

The benefits of a stronger AMP with the advantages of scale and operational capacity are becoming evident as the company capitalises on improving investment markets and a rebound in the level of discretionary superannuation contributions.

Key highlights

• AMP Bank delivered record profit of A$83 million – up 34 per cent on FY 12 reflecting ongoing growth in home loan customers and lower funding costs.
• Strong AFS net cashflows of A$1.3 billion – net AFS cashflows up from A$308 million FY 12.  Cashflows into the Australian wealth management business unit almost tripled to $2.2 billion from A$821 million FY 12.
• North platform cashflows almost doubled to A$4.1 billion – now with A$10 billion AUM, a fivefold increase since AMP acquired North in 2011 as part of the AXA merger.  North’s success demonstrates this wrap platform’s appeal and quality, including fast online technology and access to a broad range of quality investments.
• AMP SMSF administration established as market leader – following both organic growth and a number of strategic acquisitions aimed at delivering scale and efficiency, AMP is now focused on broadening distribution reach, developing advice capabilities and developing quality investment products tailored for the SMSF market.
• 86 per cent and 67 per cent of AMP Capital funds met or exceeded client performance targets over one and three years respectively – representing improved investment performance.
• New Zealand operating profit up 19 per cent – buoyed by strong cost management, improved life insurance experience and a stronger New Zealand dollar.

Growth strategy

“With the AXA integration now complete, and most of the significant regulatory changes largely implemented, AMP’s strategy remains to focus on the attractive A$2.2 trillion Australian wealth management market; transform the core of the Australian business to a more customer-centric model; reduce costs to maintain market-leading efficiency and to continue to invest selectively internationally, with a focus on high growth Asian markets.

“We made considerable progress against our growth strategy in 2013.  The pathway to a more customer-centric organisation is clear and work is underway on improving multi-channel access, diversifying advice models and better using data to drive customer offers,” Mr Meller said.

As announced in August 2013, AMP expects to deliver A$200 million pre-tax recurring, run-rate cost savings by the end of 2016.  AMP expects to invest A$320 million (pre-tax) over the next three years to deliver these efficiencies.

Our commitment to investing in selective growth opportunities in Asia is providing returns through the successful launch of a A$2.2 billion mutual fund by our joint venture with China Life and the further development of our relationship with MUTB in Japan,” Mr Meller said.

AMP established its joint venture with China Life during the year and is now well-positioned to participate in China’s rapidly growing mutual fund investment market.  AMP Capital further deepened and broadened its relationship with MUTB  and now offers two institutional funds and three retail funds through MUTB’s extensive distribution network with AUM of more thanA$570 million.

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The final size of the offer will depend on the volume of applications received and accepted under the reinvestment offer, securityholder offer and general offer, which are expected to open on Thursday 14 November 2013.

The margin determined under the bookbuild is 2.65 per cent per annum over the market rate, which is the bottom of the expected range of 2.65 per cent to 2.85 per cent per annum.

Through the bookbuild process, AMP has allocated $300 million of AMP Notes 2 on a firm basis to syndicate brokers and institutional investors under the broker firm offer and institutional offer. The allocation to syndicate brokers includes an allocation for eligible AMP Notes holders who are participating in the reinvestment offer through the broker firm offer.

AMP Chief Financial Officer Colin Storrie said: “We are very pleased with the level of support the offer has attracted from syndicate brokers, institutional investors and third party brokers, which has enabled us to bring forward the close of the bookbuild. AMP Notes holders, eligible securityholders and members of the public who have not participated in the bookbuild process are able to make an application for AMP Notes 2 from 14 November.”

Full details of this investment opportunity and the terms and conditions of the AMP Notes 2 offer will be set out in the replacement prospectus which is expected to be lodged with the Australian Securities and Investments Commission and the ASX on 14 November 2013. Investors should read the prospectus in full before deciding whether to apply for AMP Notes 2.

The replacement prospectus will be available to Australian investors at ampnotes2.com.au, or by calling the AMP Notes 2 information line below. Anyone wishing to acquire AMP Notes 2 will need to complete an application form included with the replacement prospectus.

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Mr Meller said the new structure and team reflects AMP’s plans to build a leaner, more efficient and increasingly customer-driven organisation.

The new structure brings together the senior leaders collectively responsible for delivering customer solutions across the organisation, as part of the one senior leadership team.

“I’m excited to announce the team that will take AMP forward as we enter the next phase of our evolution.  This new simpler structure will allow us to sharpen our focus on customers and respond to emerging opportunities more rapidly,” Mr Meller said.

The new Group Leadership Team is comprised of the following executives:

Lee Barnett – Chief Information Officer, responsible for AMP’s information technology function, workspace and sourcing.

Pauline Blight-Johnston – Group Executive Insurance and Superannuation, responsible for AMP’s risk insurance, retail superannuation, investment and pensions, and platforms business portfolios.

Rob Caprioli – Group Executive Advice and Banking, responsible for AMP’s advice, banking and corporate superannuation business portfolios.

Stephen Dunne – Managing Director AMP Capital, responsible for AMP’s investment management, investment performance and Asian growth strategy portfolios.

Gordon Lefevre – Chief Financial Officer, responsible for AMP’s finance function, effective 1 March 2014.

Matthew Percival – Group Executive Public Affairs and Chief of Staff, responsible for AMP’s public affairs function and the Office of the CEO.

Paul Sainsbury – Chief Customer Officer, responsible for AMP’s customer and self-managed superannuation business portfolios.

Brian Salter – General Counsel, responsible for AMP’s legal and governance functions.

Wendy Thorpe – Group Executive Operations, responsible for AMP’s customer service, contact centres, underwriting and claims operations portfolios.

Fiona Wardlaw – Group Executive People and Culture, responsible for AMP’s human resources function.

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Mr Lefevre will replace Mr Colin Storrie who has been with the company since 2011.

Mr Lefevre is an experienced CFO who has almost 20 years’ experience in senior finance and leadership roles. He joins AMP from Grocon where he is the Chief Financial Officer.

Previously Mr Lefevre was CEO, The Reach Foundation, and has held a number of senior finance roles at National Australia Bank, including Deputy Chief Financial Officer.

AMP Chief Executive Craig Dunn said he is delighted Mr Lefevre has accepted the CFO role with AMP.

“Gordon brings significant financial services knowledge and leadership capabilities to AMP and will be pivotal in capitalising on the success of the merger for AMP as we take the company to the next level,” said Mr Dunn.

Mr Storrie, who is leaving AMP to pursue other business interests, has worked with AMP to recruit his successor and will handover official responsibilities as CFO on 1 March 2014.

“Colin has made a significant contribution to AMP and has been a valuable member of the AMP Leadership team since he joined AMP.  He has brought a strong focus to funding, capital management and performance reporting,” said Mr Dunn.

Mr Lefevre has a Bachelor of Accounting Science (Honours) from the University of South Africa and a Bachelor of Commerce from the University of Kwazulu-Natal, South Africa and is a Chartered Accountant.

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AMP releases 2012/13 profit results.

AMP Limited has reported a net profit of A$393 million for the half year to 30 June 2013^[1], up 5.4 per cent on A$373 million reported for 1H 12.

Underlying profit^[2] was A$440 million compared with A$488 million for 1H 12, reflecting strong growth in the earnings of all business units, except wealth protection which was affected by a challenging life insurance market, and lower underlying investment income.

The Board has declared an interim dividend of 11.5 cents per share compared with 12.5 cents per share for the 2012 interim dividend.  This represents a payout ratio of 77 per cent of underlying profit and is within AMP’s target range of paying 70-80 per cent of underlying profit in dividends.  The dividend will be 70 per cent franked, with the unfranked amount being declared as conduit foreign income.

AMP also announced a new business efficiency program is underway that is expected to deliver A$200 million pre-tax recurring, run-rate cost savings by the end of 2016.

The company will invest around A$320 million (pre-tax) over the next three and a half years to deliver these business efficiencies, to further strengthen its competitive position in a market that continues to change.  These one-off costs will be funded through a combination of future retained earnings, the capital surplus and new shares issued under the dividend reinvestment plan (DRP).

Chief Executive Officer Craig Dunn said with the AXA integration project almost complete, having met or exceeded all its objectives, AMP is now ready to capitalise further on the strengths of the merged business and take the company to the next level.

“We will continue to build on the success of the merger to create a leaner, more efficient and increasingly customer-driven organisation.

“We will increase the scale and pace of change in our core business, using our expertise and Australia’s largest adviser footprint,

to respond to consumers’ demands for greater control, transparency, simplicity, convenience and value,” Mr Dunn said.

Performance against key measures:

• Underlying profit: A$440 million in 1H 13, down 10 per cent on 1H 12, reflecting poor lapse and claims experience in wealth protection and lower underlying investment income – following a reduction in the assumed after tax investment return on shareholder funds flagged in February 2013, given falling interest rates.
• Cost to income: Controllable costs fell again, down 3 per cent from 1H 12 to A$652 million.  The cost to income ratio was 48.6 per cent for 1H 13, up 2.1 percentage points on 1H 12.  All business units, excluding wealth protection, achieved substantial improvements in their cost ratios.

Growth measures:

• AMP Financial Services’ net cashflows were A$862 million, a significant improvement from net cash outflows of A$113 million in 1H 12, reflecting the continued success of the North platform and AMP Flexible Super.
• AMP Capital external net cash outflows were A$2,070 million, an increase in net cash outflows from A$1,345 million for 1H 12, impacted by the withdrawal of funds by Japanese retail clients driven by the effects of Japanese economic policy, including a weaker Yen.
• AMP Financial Services’ value of risk new business was A$69 million, compared with A$112 million for 1H 12, primarily as a result of lower sales volumes and strengthened lapse assumptions in FY 12.
• Underlying return on equity: Reduced 2.2 percentage points to 11.2 per cent in 1H 13 from 1H 12, reflecting higher capital held, poor insurance experience and lower underlying investment income.

Mr Dunn said AMP’s wealth management and investment businesses performed strongly, offset by a challenging life insurance market.

“The combined earnings from all businesses, excluding our wealth protection business, were up

17 per cent, as net cashflows increased significantly in our wealth management business, investment markets continued to improve and we drove down costs.

“These results demonstrate the real potency of AMP’s business franchise, scale and operating leverage, when both investment markets and investor confidence are more positive,” Mr Dunn said.

In wealth management, AMP’s largest business unit, operating earnings for 1H 13 were up 20 per cent compared with 1H 12, reflecting increased investment related income from higher customer account balances, a strong rebound in net cash flows, good cost control in a growing business and substantial growth in AMP Bank profits, up 31 per cent on 1H 12.

In wealth protection, operating earnings were A$64 million, down 52 per cent on 1H 12, reflecting a higher level of claims and insurance policy lapses than expected, as reported in AMP’s 24 June earnings update.

The life insurance sector is facing both structural and cyclical change, and a range of initiatives are in train to address these factors.  These include improved customer retention campaigns, additional resources to handle customer claims more effectively, and helping income protection customers get back to work more quickly after illness or injury.

“Improving the performance of the insurance business is an area of critical focus as we introduce a series of actions to improve both customer retention and the management of claims, and which will deliver benefits to both customers and shareholders,” Mr Dunn said.

While these actions should deliver some benefits in the short term, given the challenging industry conditions, sustained improvement is expected over the medium term with potentially uneven progress given the inherent volatility in an insurance book of this size.

Other key highlights:

• AMP Capital performed well – operating earnings increased 13 per cent reflecting strong AUM growth and tight cost control, reporting a cost to income ratio of 63.3 per cent, in advance of the 1H 14 target range of 60 to 65 per cent.
• Strong investment performance – three of the top 20 best performing Australian balanced funds are managed by AMP^[3], and AMP KiwiSaver is the top performing default KiwiSaver fund^[4].
• New Zealand achieved strong growth in profit margins – reported operating earnings of A$46 million, up 21 per cent compared with 1H 12, reflecting growth in both AUM, particularly in KiwiSaver, and in individual risk annual premium income, along with tight cost control.
• Robust AMP Bank performance – delivered A$38 million operating earnings, up 31 per cent compared with 1H 12, reflecting improved net interest margins following an increase in the use of wholesale funding and disciplined cost management.
• Planner numbers continue to grow – AMP’s planner network remains the largest planner and adviser network in Australia, demonstrating the continued attraction of AMP’s advice models, particularly as financial planner practices adapt to the new regulatory environment.  AMP now has 3,680 financial advisers in Australia, up from 3,636 at FY 12.
• Best net cashflows in wealth management for six years – increasing nearly sixfold on 1H 12 to A$1.4 billion. The combined AUM of North and AMP Flexible Super at 30 June 2013 was A$15.5 billion, up 80 per cent on 12 months ago.  All of AMP’s financial planner groups experienced good uplifts in net cashflows on 1H 12.
• North platform continued to grow strongly – with net cashflows nearly tripling to A$1,864 million for 1H 13, compared with A$636 million for 1H 12, and more AMP planners choosing to recommend the North platform to their customers.
• AMP remains number one provider of SMSF administration services – continuing to grow at twice the market rate with the number of accounts under administration increasing to 9,650 at 1H 13, from 3,000 at 1H 12, reflecting both acquisitions and organic growth.

Capital management

 AMP continues to hold a significant capital surplus, with A$1,703 million capital above minimum regulatory requirements at 30 June 2013, up from A$1,372 million at 31 December 2012.  This reflects 1H 13 retained profits, additional capital issued under the DRP, capital efficiency initiatives and more favourable investment markets.

AMP has maintained a strong balance sheet, with little change to gearing and interest cover, and has access to significant liquidity.

AMP continues to offer a DRP to eligible shareholders.  For the interim 2013 dividend, new shares will be issued and no discount will apply.

——————-

1.  AMP’s profit measures exclude MUTB’s 15 per cent share of AMP Capital’s earnings.

2.  Underlying profit is the basis on which the AMP Board determines the dividend payment and reflects the business performance of AMP. It is AMP’s preferred measure of profitability as it removes one off costs and some of the impact of investment market volatility.

3.  AMP RIL Balanced, AMP ipac Super Directions Balanced, AMP Future Directions Balanced; Chant West Top Balanced Superannuation Funds (61-80% allocations to growth assets) investment performance for one year to 30 June 2013.

4.  Morningstar KiwiSaver Survey; investment performance for one year to 30 June 2013.

——————-

Important note

Forward-looking statements in this release are based on AMP’s current views and assumptions and involve known and unknown risks and uncertainties, many of which are beyond AMP’s control and could cause actual results to differ materially from those expressed or implied.  They are not guarantees or representations of future performance, and should not be relied upon as such.

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Mr Meller replaces Craig Dunn who will retire from AMP following six years as Chief Executive Officer and Managing Director and 13 years with the company.

Mr Meller joined AMP in 2001 and has since held a number of senior roles including Managing Director, AMP Financial Services, which he has held since October 2007.

AMP Limited Chairman, Peter Mason said Mr Meller’s appointment, following an extensive internal and external review, is testament to the quality and rigour of AMP’s approach to succession planning.

“Craig Meller has demonstrated a great capacity to lead and grow the business since he joined AMP more than a decade ago. He has successfully led AMP’s largest business unit during a period of significant regulatory and industry change, while at the same time new technologies have been driving a major shift in customer behaviour,” Mr Mason said.

“He is the right person to lead AMP as we progress the next phase of our strategy, which capitalises on our stronger integrated business.”

Mr Mason said outgoing CEO Mr Dunn will be leaving AMP in a strong position for his successor.

“Craig Dunn leaves AMP in great shape after successfully steering the company through the global financial crisis, unprecedented regulatory change and one of Australia’s largest and most successful financial services integrations,” Mr Mason said.

“On behalf of the Board I thank him for his exceptional leadership and ability to capitalise on the opportunities during this challenging time.”

Mr Meller said he was looking forward to the challenges and opportunities of his new role.

“I’m very excited about the opportunity to lead AMP, particularly in an environment where our customers’ needs are rapidly changing. As we have announced today, we’re focusing on driving higher revenues through deeper customer relationships and improved business efficiencies,” Mr Meller said.

Mr Meller and Mr Dunn will work together closely to ensure a smooth transition to the new leadership.

Craig Dunn said: “It’s been a privilege to lead AMP during a time of extraordinary change and opportunity, and now is the right time for a leadership change. Craig Meller has significant financial services experience, both in Australia and overseas, and I know he will be an outstanding CEO.

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AFS net cashflows were $95 million for the quarter, a $387 million turnaround on Q1 12, which had a net outflow of $292 million.

The growth in AFS cashflows in the quarter was the result of a strong performance by its retail business on AMP platforms with $391 million net cashflows compared to outflows of $45 million in Q1 12, and strong flows into AMP SMSF which was established in June 2012.

Total Australian wealth management AUM at 31 March 2013 was $89.8 billion, up 4.8 per cent on Q4 12.  AMP Capital AUM was $130.7 billion, up 1.6 per cent on the previous quarter. 

Key points for Q1 13 were:

• AMP’s North wrap platform continued its strong growth in the quarter tripling net cashflows to $779 million compared to $228 million in Q1 12, reflecting the benefits of recent platform enhancements and a strong take-up across AMP’s aligned planner network. AUM increased by $1 billion to $5.7 billion, up from $4.7 billion in Q4 12. 
• North’s popularity was underscored by the recently announced 2013 Wealth Insights survey where it was the highest placed wrap platform in the market amongst financial planners and advisers.
• AMP Flexible Super AUM increased 10 per cent to $8.1 billion compared to $7.3 billion in Q4 12. Net cashflows were $464 million, down from $581 million in Q1 12, reflecting the broader availability of North and a lower proportion of customers moving into AMP Flexible Super from AMP’s older Flexible Lifetime product.  Withdrawals from retirement accounts were also higher, reflecting AUM growth.
• AMP corporate superannuation net cashflows for the quarter were $45 million compared to $87 million in Q1 12.  Cashflows in Q1 12 benefitted from a one-off $48 million transition of funds from a plan won in the previous year (2011).
• AMP SMSF cashflows[1] were $97 million, up from $55 million in Q1 12 post the establishment of the AMP SMSF business unit in June 2012.  As at 31 March 2013, the business unit had over 9,400 member accounts (including 1,365 SuperIQ accounts), up from more than 9,100 in Q4 12.
• AMP Bank’s mortgage book was relatively stable at $12.5 billion compared to $12.4 billion in Q4 12.  The deposit book fell 2.5 per cent to $8.1 billion from $8.3 billion in Q4 12. This was due to a change in the funding mix preference for AMP Bank post a medium-term notes issue of $500 million in March 2013.
• AFS’s mature net cash outflows were $439 million, compared to net cash outflows of $394 million in Q1 12.  The increased outflow is largely a result of higher transfers of inactive accounts to the Australian Tax Office, following rule changes on the size of superannuation balances and the period of inactivity, which was announced in 2H 12.
• New Zealand net cashflows were $20 million compared to $47 million for Q1 12.  Cashflows were impacted by an increase in KiwiSaver outflows for the quarter reflecting higher AUM and an increase in KiwiSaver customers over 65 years old withdrawing funds as the initial five year KiwiSaver lock in came to an end.
• Risk insurance annual premium income for AFS’s risk business was relatively stable at $2.03 billion compared to $2.02 billion in Q4 12. 

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The share donation was managed through ShareGift Australia, a not-for-profit organisation that enables the proceeds of small parcels of shares to be donated to charity.

As part of the AMP Share Sale Facility, AMP wrote to over 52,000 shareholders who held 112 shares or less, inviting them to donate and recommend a charity via ShareGift or to receive the cash.

AMP shareholders helped contribute to the largest ever pooled contribution by ShareGift since the model was first piloted in 2007.

ShareGift Australia donates a pooled contribution of shares on a quarterly basis, allowing shareholders with small parcels of shares to sell them tax deductible and without incurring a brokerage fee.

Over 900,000 Australians own small parcels of ASX listed shares in excess of $93 million.

AMP’s Head of Shareholder Services Marnie Reid said AMP was delighted with the number of shareholders who took the opportunity to donate their shares.

“AMP is pleased at the overwhelming generosity of our shareholders who used the opportunity to sell their shares and recommend a number of very worthy causes to benefit from the sale proceeds.

“We were fortunate to partner with ShareGift and provide our shareholders the opportunity to sell their shares in a way that is easy and tax deductible,” said Ms Reid.

Andrea Broom, Executive Officer of ShareGift, said the share sales provide shareholders with the unique opportunity to utilise the proceeds from small parcels of shares which they may otherwise struggle to sell.

More than 500 AMP shareholders elected to donate the proceeds of the sale of their shares. These were donated to a wide variety of charities already supported by ShareGift, as well as an additional 47 charities recommended by AMP shareholders.

“ShareGift Australia is a tax effective way for Australian shareholders to donate their shares to ShareGift and recommend their chosen charity to receive the full value of their shares without the impost of brokerage.

“In some cases shareholders can be left with a very small number of shares, for example an accidental holding as a result of a dividend reinvestment plan, and have no other avenue available to divest these shares.

“We were delighted AMP participated in what was the largest ever pooled contribution we have donated to date,” said Ms Broom.

ShareGift accumulates the share donations over each quarter. The ShareGift Board takes into consideration recommendations of a number of selected charities before dispersing the full proceeds. To date, 252 charities have benefited from the ShareGift model.

The AMP Share Sale Facility allowed retail shareholders to sell small parcels of shares without incurring a brokerage fee. The facility took place between October 2012 and December 2012.

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