Slide 1: Annual Results 2003
Annual Results 2003 Andrew Mohl
Slide 2: Today's presentation outline
Today’s presentation outline =» Overview BR Business Unit performance and outlook BR Capital management = Group outlook for 2004
Slide 3: Overview — key initiatives in 2003
Overview — key initiatives in 2003 x New Chairman and 4 new directors Strong cost initiatives implemented across Group Major restructure of AMP Banking with sale of non-core portfolios UK Life operations closed to new business; major reduction in risk profile; substantial reduction in costs; large w
Slide 4: Overview — 2003 financial results
Overview — 2003 financial results & % % Net loss of A$5,542m driven by UK writedowns and loss on demerger Net profit after tax before other items for demerged AMP of A$619m and underlying contribution up 25% to A$609m Underlying return on equity up to 18% Substantial improvement in balance sheet pos
Slide 5: Overview — 2003 profit and loss
Overview — 2003 profit and loss AMP Financial Services 411 324 383 AMP Capital Investors 68 72 65 Cobalt/Gordian 58 49 39 Total BU operating margins 537 445 487 Discontinued businesses 5 6 0 Corporate office costs (34) {54) (45) Total operating margins 508 397 442 Underlying investment income 210 21
Slide 6: Overview - key drivers of result v EM top range forecast
Overview - key drivers of result v EM top range forecast “Better-than-expected profit reflects, in roughly equal parts, improved business unit performance and a number of positive one-off items” AMP Financial Business strength (A$6m), and experience Services 411 383 profits and capitalised loss reve
Slide 7: Overview — key performance indicators
Overview — key performance indicators Earnings per share (underlying)’ A$0.44 A$0.43 A$0.78 RoE (underlying)? 18.1% - 9.3% Total Operating A$508m A$397m 7 margins Value of new business A$239m A$234m> - Controllable costs A$803m A$927m - Dividend per share 1HO3 A$0.07 (15% franked) - AS$O.46 p 2HO3 A
Slide 8: Overview — 2003 net cashflows of largest five groups by AUM
Overview — 2003 net cashflows of largest five groups by AUM 352 Ei Mar-03 = Bl Jun-03 Hi sep-03 & Dec-03 (729) AMP Commonweaith ING Australia Nationai Australia Westpac Bank of Australia Bank Source: 2003 ASSIRT preliminary cashflow data for total retail managed funds excluding cash management trust
Slide 9: Overview — Group costs and cost ratio for demerged AMP
Overview — Group costs and cost ratio for demerged AMP Costs Cost ratio 1400 e 70 A$1,264m 1200 re AS1,071m e 60 1000 "ey AS$927m "tea rere A$803m p55 800 e 50 600 5 45 400 40 200 4 35 ASM 9 30 % FYOO FYO1 FY02 FY03 Controllable costs mms Cost to income ratio
Slide 10: Overview — net debt and gearing for demerged AMP
Overview — net debt and gearing for demerged AMP 7 1 Debt levels Gearing 3.6 80 A$3.0b 3 ' ” 70 A$2.65b “m 60 25 i, on A$2.0b om 50 2 i ae 40 15 30 4 20 08 10 A$b 0 ee al 0 % May 1 2003 pro forma Oct 2003 EM Dec 2003 actual? 1 Defined as net debt as a percentage of (shareholder equity + net debt) 2
Slide 11: Business unit review and outlook
Business unit review and outlook
Slide 12: AMP Financial Services
AMP Financial Services 8 5 8 8 8 Operating margins up 20% to A$389m on BAU basis (and up 27% to record A$411m with one-off benefits) reflecting strength of business franchise and much lower cost base Return on Invested Capital (excluding AMP Banking) up from 13.3% in FY 02 to a record 15.5% Total co
Slide 13: AMP Financial Services — operating margins
AMP Financial Services — operating margins AgSm FYO2 Equities / New Mature Expense FY03 profit Experience Capitalised FY63 operating bond yields business margin reductions margins profits loss reversals operating margins volumes reductions margins 13
Slide 14: AMP Financial Services — analysis of contribution by contemporary and mature products
AMP Financial Services — analysis of contribution by contemporary and mature products’ FY03 FY02 FY03 FY02 AUM A$29.1b A$26.5b A$19.7b A$20.6b Total profit A$173m A$151m AS176m A$156m margins Persistency 80.4% 82.6% 85.2% 84% RoBUE? 16.8% 15.1% 17.5% 14.4% 1 Excluding AMP Banking and New Zealand 2 E
Slide 15: AMP Financial Services — embedded value
AMP Financial Services — embedded value @ 3% discount margin 200 43 (73) (73) 6,786 (4,076) a ee? 1. . ASm FYO2 Expense FYO0ZEV Expected FYG3new Cost Investment Persistency Other FY03 EV Net FY03 EV allocation restated return business savings &bond assumptions {before transfer {after yields transfer
Slide 16: AMP Financial Services — value of new business
AMP Financial Services — value of new business: @ 3% discount margin ASm FY02 VNB Restatement FYG2VNB Bondyields Costsavings Volume and Persistency Other FY03 VNB restated mix of assumptions business Excludes AMP Banking 16
Slide 17: AMP Financial Services — costs and cost ratio
AMP Financial Services — costs and cost ratio He “ . Controtlabie costs Cost to income ratio 900 60 A$790m 800 55 700 A$664m AS61im 600 50 A$S17m 500 45 400 300 40 200 35 100 ASm 06 30 % FYOO FYO1 FYO2 FYO3 Ei controllable costs excluding AMP Banking vw” Cost to income ratio excluding AMP Banking 17
Slide 18: AMP Financial Services — outlook
AMP Financial Services — outlook Ly Simple, focused, disciplined strategy ay a ae a ca ae ; a ca i a il co ] - c a a aa i a iO i i 6 a ae a a a a - : | a at the |o\ ae ia ae _— ] ele £ Bucs J oo. ws 18
Slide 19: AMP Financial Services — outlook
AMP Financial Services — outlook Basis for competition ct Manufacturing Primary basis of competition Comparative advantage Strategic priorities 19
Slide 20: AMP Financial Services — outlook
AMP Financial Services — outlook * Driving growth in EV and VNB through improved cashflows and planner growth (numbers and productivity) off a lower cost base « Lower investment income likely from reduced capital in business and change in asset mix supporting policyholder liabilities » However, larg
Slide 21: AMP Capital Investors
AMP Capital Investors % 4 4 G Operating margins down 6% on FY02 to A$68m as improved investment performance and transaction fees largely offset loss of LPTs Cost ratio up to 63% from 60% due largely to loss of LPTs Good investment performance with 74% of assets under management at or above benchmark
Slide 22: AMP Capital Investors — operating margins
AMP Capital Investors — operating margins A$m FY02 operating Lower income Higher Loss of LPT Lowerfunds tLowerbond FY03 operating margins taxexpenses performance revenue management lending, margins and transaction fees leasing & fees development fees 22
Slide 23: AMP Capital Investors — investment performance
AMP Capital Investors — investment performance Comparison with the Mercer pooled fund survey - balanced funds universe Rates of Return {%) Performance after tax and after fees for periods ended January 2004 14 10 (2) 6 Months (%)} AMP Balanced Growth return and Ml 6.1 (2) ranking Number of Funds 31
Slide 24: AMP Capital Investors - outlook
AMP Capital Investors - outlook # Steady operating margins outlook, as LPT revenue replaced by growth in new products » A$585m raised in six new products in Future Directions range since 4Q 03 launch » A$700m raised in Japan’s first-ever global property securities mandate from Nikko Asset Management
Slide 25: Cobalt/Gordian
Cobalt/Gordian 4 18% increase in operating margins on FY02 to A$58m, driven by effective claims management and commutations, especially in 4Q 03 Commutation savings delivered A$49m to margins Focus remains on achieving a profitable runoff of the outstanding books while maximising returns to sharehol
Slide 26: Gordian Runoff - gross claims reserves
Gordian Runoff’ - gross claims reserves’ 2,482 1,989 1,587 4,179 ASm FY99 FY0o FYO1 FY02 FY03 ’ Represents about 90% of total runoff book 2 Gross discounted claims including risk margins. Prior years adjusted to 31 December 03 exchange rates 26
Slide 27: Capital management overview
Capital management overview
Slide 28: Capital overview — financial strength improved
Capital overview — financial strength improved x AFS transfer of A$1,357m in FY03 represents 2003 profit and surplus capital, comprising: » A$925m from AMP Life statutory funds (A$200m in 1H03, A$725m in 2HO3) resulting from higher operating profits, stronger investment markets and above-benchmark r
Slide 29: Capital overview — accelerated debt reduction
Capital overview — accelerated debt reduction * Improved financial strength provides flexibility in debt reduction » Buying back Income Securities appropriate first step » Income Securities are relatively expensive %» AMP has too much hybrid debt/equity » Income Securities are more accessible debt t
Slide 30: Capital overview — accelerated debt reduction
Capital overview — accelerated debt reduction Income Securities buy-back: « Off-market buy-back « Offer price is A$98 plus accrued interest «= Total cost depends on acceptances > AMP can fund up to the full amount (A$1.2bn) « Offer booklet expected to be sent to Income Securities holders this month,
Slide 31: Capital overview — ongoing capital management
Capital overview — ongoing capital management » AMP will pay dividends equivalent to around 60% of sustainable earnings » AMP will have sufficient capacity to frank dividends at 85%+ for the next 4-5 years =» DRP will be maintained to meet retail shareholder preferences but will no longer be underwr
Slide 32: Group outlook and summary
Group outlook and summary
Slide 33: Group outlook - 2004
Group outlook - 2004 * Integrated, Australasian business driving shareholder returns through operational excellence » Run AMP better than it’s ever been run before « Streamlined corporate office; simplified structure and processes; physical consolidation of offices » Revamping performance management
Slide 34: Group outlook — 2004
Group outlook — 2004 # Encouraging start to sales activity in 2004 » AFS inflows up 25% in first two months on previous comparable period %» Positive inflows in new products and mandates in AMP Capital Investors # Strong growth likely in AFS’s embedded value and value of new business « Broadly stead
Slide 35: Summary
Summary * Demerger successfully delivered * Strong improvement in underlying performance of demerged AMP * Management focus in 2004 on operational excellence to deliver shareholder value reducing unit costs » growing cashflows ¥ outperforming on investments ¥ %» lowering balance sheet gearing 35