AMP confirms $2 billion loss

financial services business chief executive officer

20 August 2003
| By Craig Phillips |

AMPtoday affirmed market expectations in announcing a $2.16 billion market loss, attributing the losses to the previously flagged poor performance of its UK life operations, prolonged bear markets and ill-timed acquisitions.

The losses consisted of a $2.02 billion writedown of assets, $233 million being spent on restructuring costs and $111 million going towards its de-merger proposal.

The group is still seeking to de-merge its Australasian operations from its poorer performing northern hemisphere operations, however it hasn’t ruled out other outcomes such as the UK business being sold and removing the need for a de-merger or if the de-merger is not approved.

However AMP chief executive officer, Andrew Mohl says, “while a number of details are yet to be resolved, implementation of the de-merger is progressing.”

The group says total shareholder capital of $11.5 billion is sufficient to facilitate the de-merger but that the mix of capital may need to change, with Mohl saying though the group doesn’t need to raise new capital, it will need to refinance its reset preference shares to achieve regulatory, ratings and tax efficiency.

Regarding the performance figures, Mohl says that “while very disappointing” the results are more promising domestically, and he is quick to highlight the resilience of the group’s Australian operations.

“The underlying results show that our Australian financial services business remains resilient, reflecting its strength in brand, distribution and scale,” Mohl says.

Mohl’s reassurance comes despite the financial giant’s domestic business being negatively impacted by lower investment and bond markets and a decline in the amount of new business written, with operating margins falling 9 per cent to $172 million and new business down 20 per cent compared to the first half of 2002.

As a result it has slashed its dividend to 7c - down from 26c a year earlier.

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