Tax reform strikes AMP Life

Tax reform is likely to wipe $50 million off the value of new business at AMP Life, AMP Finan-cial Services managing director Andrew Mohl has told a Merrill Lynch conference.

Tax reform is likely to wipe $50 million off the value of new business at AMP Life, AMP Finan-cial Services managing director Andrew Mohl has told a Merrill Lynch conference.

It would reduce embedded value by $120 million, in line with earlier estimates, Mohl says.

Mohl says the Ralph reforms will have an adverse impact on return on shareholder capital of 0.8 per cent, if taken in isolation.

"However, like import competing industries facing tariff cuts, the winds of competition are proving highly invigorating for the business," Mohl says.

He says a major reduction in costs is likely beyond 2000, relative to the costs for full year 1999.

"Notwithstanding the impact of business tax reform, we anticipate the AMP Financial Services cost ratio will head toward the low 50 per cent range compared to 62 per cent in 1999," he says.

He says AMP Financial Services will also enjoy the benefits of back office re-engineering, ePro-curement, the re-negotiated CSC contract and general efficiency improvements. The benefits of cost reductions will broadly flow to the non-life businesses, such as AMP Services, rather than AMP Life.