Slashed investment income cuts AMP profit

By Phil Boeyen, ShareChat Business News Editor

Thursday 23rd August 2001

AMP (NZSE: AMP) is blaming poor equity markets in the UK for a drop in first half profitability.

In the six months to the end of June the insurance and financial services company has reported a net profit of A$403 million compared with A$525 million last year.

Total net premium income fell slightly from A$7.973 billion last year to A$7.825 billion but investment and other income slumped dramatically to A$25 million from A$292 million recorded in the first half of 2000.

CEO Paul Batchelor says the interim net profit was underpinned by core recurring operating margins of A$486 million, up 20% on first half 2000, but was offset by weaker investment earnings from volatile world markets.

"The 20% increase in core recurring operating margins to A$486 million continues the trend of sustained growth over the past three years. This demonstrates the fundamental strength of the Group and the fact that we are driving it hard.

"Despite the difficult market conditions, we have made substantial progress against our strategy and achieved many of the business priorities we set at the beginning of the year.

"We remain very focused on our core wealth management businesses, having divested non-core businesses. We continue to build strong positions in our home markets of Australia, New Zealand and the UK, and we continue to invest for international growth."

Mr Batchelor says the initiatives of the past six months put AMP in an even stronger position in key wealth management markets around the world, markets that are expected to experience double-digit growth over the next twenty years.

The company says its financial services business in Australia and New Zealand continues to be its earnings powerhouse, recording a 16.5% increase in core recurring operating margins for the half.

AMP also realised value from its Virgin joint ventures this half, selling its 25% stake in the Virgin One bank business and the integration of the Virgin Direct and virginmoney.com businesses. The initiative generated a profit of A$76 million.

In its banking business the company reports both Cogent and AMP Banking produced increased revenues and profits and AMP Banking in Australasia moved into profit in the six months.

The company also reports that its exit from general insurance manufacturing worldwide, announced in June, is on track. The UK component of the transaction was completed in July and the Australian component will be completed at the end of September.

The sale of its New Zealand general insurance operation and joint venture interests is progressing, and an announcement is expected within the next few months.

"Overall the transactions will realise intangible assets of A$1.1 billion without financial loss or detriment to shareholder value," the company says.

AMP has declared an interim dividend of A25 cents per share.

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