AMP’s 1H18 results have shown that its Australian wealth protection operating earnings plummeted from $51 million to just $1 million over the six months.
AMP reported to the ASX that the decrease was impacted by a deterioration in claims experience, which it said was driven by higher than expected claims activity, primarily in total and permanent disability. This reflected a wider industry challenge.
Capitalised losses and other one-off experiences also contributed to the decrease, with $29 million of the drop being largely due to reserve strengthening on a large group plan, which terminated at the start of the current financial year.
Profit margins for the firm’s wealth protection business declined by $3 million to $46 million over 1H18, which it said reflected the implementation of previously-announced reinsurance agreements. The loss was partially offset by cost savings.
Other parts of the business remained profitable despite the ongoing consequences of the Royal Commission, with the underlying profit for 1H18 sitting at $495 million (down from $533 million in 1H17) and net profit of $115 million (down from $445 million). The decline in net profit factored in the extensive advice remediation provisions announced by AMP late last month.
The firm’s embattled wealth management arm showed resilience, with its operations earnings increasing six per cent to $204 million and assets under management also growing six per cent to $132 billion.
AMP acting chief executive, Mike Wilkins, anticipated that 2H18 would continue to be a difficult period for the firm.
“The events around the Royal Commission into financial services have challenged our reputation, and while we continue to monitor the impacts, we have taken action to stabilise the business and move forward,” he said.
“Headwinds remain for the second half of the year, but our focus is clear. We’ll continue to prioritise our customers, putting their interests first. We’ll progress the transformation of our advice business, strengthen risk management and accelerate the portfolio review aiming to release further capital from our manage for value businesses.”