Investment loss knocks AMP

By Phil Boeyen, ShareChat Business News Editor

Wednesday 27th February 2002

Net profit at financial services company AMP (NZSE: AMP) slumped 40% last year and the company is forecasting that the current year will also be a tough one.

Early in January the company warned that its investment income for the year ended December could be marginally negative and the latest result has confirmed this, with an investment loss of A$26 million for the period compared with the previous profit of A$617 million.

That result pushed total group net profit to A$690 million for 2001 compared to A$1.152 billion the year before.

AMP boss Paul Batchelor admits that the company is disappointed that global investment markets impacted investment income but believes the result demonstrates the resilience of the core businesses.

"We are pleased that shareholders will receive an increased full year dividend of A$0.51, reflecting the growth in profitability of our underlying businesses."

Mr Batchelor says AMP sold a number of businesses during the year which were considered non-core and did not achieve target returns including general insurance, Resolve Engineering and Virgin One.

"These initiatives freed some A$2 billion in capital, assisting us in acquiring Towry Law and Interactive Investor international in the UK, reducing our debt, and investing in our core businesses in new and existing markets.

"It also enabled us to build our capital strength, which remains a priority for AMP and is particularly important in managing the business in turbulent times."

The company reports that core recurring operating margins rose 14% during the year including a 12% increase in Australia and New Zealand and a 24% rise in its UK financial services business.

However the margins fell nearly 4% at the company's investment arm, Henderson Global Investors.

Mr Batchelor says the company will continue to target growth in core recurring operating margins of 10% or more over the long term although it expects 2002 to be another tough year for global financial services.

"We are managing our businesses accordingly but we are doing so without losing sight of our long-term goals.

"We have very strong existing businesses that provide the foundation for ongoing organic growth. Our primary focus in 2002 is to drive the short and medium term profitability of these businesses and deliver increased value for shareholders over the long term."

AMP says its success will be measured by such factors as increased net cash flows, increased value of new business, reduced cost ratios and growth in margins and total profits.

The continued transformation of the UK business will also be paramount according to Mr Batchelor, "particularly in light of the opportunities presented by proposed regulatory change".

The latest results equate to a drop in earnings per share from A$1.05 in 2000 to A62 cents for 2001 while return on equity has fallen to 8.1% from 14.3%.

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