AMP bounces back well with a little Kiwi assistance

Friday 2nd March 2001

By Graeme Hunt
in Sydney

Smart business, including a successful new product launch, helped New Zealand contribute to AMP's spectacular profit turnaround in 2000.

The financial services operator reported a $A1.1 billion profit after tax and abnormals this week, 37% coming from its Australasian financial services operation. The result, for calendar 2000, was in line with analysts' predictions, confirming AMPs public statement in the 1999 annual report that it was back on track.

In 1999 it lost $A424 million, much as a result of its struggling general insurance operation (especially New South Wales-based GIO) and its costly UK life office/pension businesses.

The latest result reveals better news for general insurance but with an overall operating margin of just $A39 million it has a long way to go before it can become a core performer for AMP.

AMP continues to investigate a range of options to improve the return from this business unit, AMP chief executive Paul Batchelor said.

For Mr Batchelor, who took over as chief executive in August 1999 after the messy and costly departure of American George Trumbull, 2000 has had a strong upside.

AMP has sharpened its focus, competing in the high-growth international wealth-creation and protection markets with an increased emphasis on higher-margin, value-added financial services, he said.

In was in financial services where AMP, a former staid life office founded in 1849, made its mark in 2000.

In Australia and New Zealand - there was no separate presentation for the New Zealand results - financial services contributed $A370 million to operating margins, up 32% on 1999. Retail growth was up 16% while growth overall rose 8%. Operating costs were cut significantly.

AMP said little in its public statements about New Zealand's contribution to financial services except to note New Zealand had maintained its market leadership with a 20% increase in retail managed funds and superannuation sales to more than $NZ700 million. It revealed its total New Zealand market size was about $NZ30 million compared with $A609 million for Australia.

When pressed on the New Zealand performance Mr Batchelor said New Zealand had grown extraordinary well. He noted funds under management had continued to grow - up one percentage point to 12% of the market - net cashflows had jumped from $A61 million in 1999 to $154 million in 2000 and AMP was dominating new business (24% of regular-premium business, 37% of single-premium business). Total after-tax profit from New Zealand operations, a footnote in the AMP Investor Report, was $A41 million compared with $A29 million in 1999.

AMP said New Zealand sales were boosted by a new retail product, Investornet, which, according to AMP, attracted $NZ42 million worth of investment.

New Zealand has long been a solid performer within AMP and Kiwi policyholders were notable for the speed and enthusiasm with which they look up share entitlements when the former AMP Society demutualised in 1997-98. New Zealanders remain a visible and valuable part of AMP's share register and an important market to cross-sell services to.

The fact New Zealand attracted so little attention when AMP reported its profit is to its credit. The company has more immediate concerns about the profitability and efficiency of GIO.

AMP profit summary
	2000 ($Am)	1999 ($Am)

Operating margins
AMP Financial Services (Australia and NZ)	370	280
UK Financial Services	264	227
Henderson Global Investors	315	127
AMP General Insurance	39	(1)
International and Technology Ventures	(7)	(39)
Less: discontinued business	(22)	(126)
Total operating margins	959	468
Investment income	617	860
Interest on corporate debt	(278)	(149)
Corporate and other expenses	(149)	(130)
Abnormals after tax	3	(1,473)
Operating profit after tax and abnormals	1,152	424

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