AMP resilient in challenging times

Craig Dunn

AMP has shown resilience in challenging markets, with losses in its funds management businesses mitigated by growth in its risk businesses.

AMP announced a 2 per cent fall in underlying profit to $437 million for the six months ended June 30, 2008. Net profit attributable to shareholders (after accounting mismatches) fell 22 per cent to $366 million. This included investment losses on shareholder funds of $49 million, and a market adjustment of $41 million, representing an unrealised loss on the fixed interest assets that back the group’s annuities portfolio.

While the group’s funds management businesses have been affected by the market volatility and the absence of the extraordinary superannuation inflows seen last year, the group’s results have been supported by strong results in its risk businesses.

The group’s Contemporary Wealth Management group (which includes its financial planning, superannuation, pensions and banking businesses) reported a fall in operating earnings of 2 per cent to $142 million. This was largely due to a reduction in assets under management, the group said.

Net cash flows in AMP Financial Services were down 69 per cent on the previous half year to $760 million, but the group delivered a 3 per cent increase in operating earnings to $334 million.

Net external cash flows in AMP Capital Investors were down 74 per cent to $369 million, while assets under management fell 9 per cent to $101 billion, “primarily because of adverse investment market movements”, the group said. Operating earnings for AMP Capital Investors were steady at $78 million.

The group said 57 per cent of its asset under management either met or exceeded benchmarks in the year to June.

While the group does have exposure to sub-prime investments, it said these are largely Australian and New Zealand credits with high ratings and the group has not incurred losses from these exposures.

Meanwhile, the value of new business in the group’s risk insurance businesses was up 13 per cent to $44 million.

In Contemporary Wealth Protection, operating earnings grew 29 per cent to $76 million, with strong new business growth in individual and group risk and an improved claims performance, the group said.

“Individual risk annual premiums income grew 12 per cent to $484 million over the previous corresponding half, reflecting 31 per cent growth in new business volumes, increased planner focus on risk business, and good growth in third party markets.”

The group’s New Zealand business was also supported by a strong risk result, with operating earnings rising 13 per cent to $27 million.

The group’s Contemporary Wealth Protection and New Zealand businesses outperformed their peers, Contemporary Wealth Management and AMP Capital Investors.

AMP chief executive Craig Dunn said the group is “weathering the difficult investment market conditions well, demonstrating its financial strength and the resilience of its business model”.

Dunn said while delivering growth in the short-term would be “challenging”, the group remains confident in the medium to long-term outlook for the wealth management industry.

The group’s interim dividend has been maintained at 22 cents per share, 85 per cent franked.