Slide 1: Demerger proposal
This presentation is not for distribution or release in the United States Demerger proposal Andrew Mohi Chief Executive Officer Paul Leaming Chief Financial Officer May 2003
Slide 2: Important information
Important information The information in this presentation is an overview and does not contain all inforrnation necessary for an investrnent decision. in making an investment decision, investors must rely on their own examination of AMP, including the merits and risks involved and the effects of the
Slide 3: Overview
Overview Operational update Reducing equity risk in UKLS Creation of two new regional businesses Capital raising Slide 4-13 Slide 14-18 Slide 19-24 Slide 25-34 Slide 35-38
Slide 4: Overview
Overview =AMP,
Slide 5: Today's announcement
Today’s announcement ¢ Reducing equity risk in UK Life Services ¢ Demerging the Group to create two new regionally focused listed companies ¢ Raising new equity capital to facilitate the demerger (A$1.0b institutional placement and A$500m share purchase plan) LO
Slide 6: The background to today's announcement
The background to today’s announcement This is the culmination of a strategic review of AMP’s portfolio of businesses initiated six months ago by the new CEO and endorsed by the Board >» Initial stages of review considered individual business units and results announced November/December 2002 > Broa
Slide 7: Aim of strategic restructuring
Aim of strategic restructuring soy puso « establish solid platforms for growth for Australian Financial Services and Henderson * provide a sustainable solution to the equity market risks in our UK life and pensions business * protect and enhance our quality businesses in the Australian and UK market
Slide 8: Key strategic decisions
Key strategic decisions * Take action to resolve equity market risk in UKLS business by reducing equity exposure of its life funds » Changed investment approach for investment portfolio supporting with-profits fund protects policyholders and shareholders « Establish two new companies by demerging th
Slide 9: Demerger rationale for AMP Group
Demerger rationale for AMP Group BI z : gy Cpe er bas pee bre Pn Page 3 « Demerger creates focused businesses with clear strategic objectives to deliver shareholder value in rapidly transforming markets ¢ Strongest linkages between the businesses within regional markets, rather than cross-markets ¢
Slide 10: Demerger rationale for Henderson
Demerger rationale for Henderson ¢ Highly regarded brand in UK and well positioned for shareholders to benefit from future industry consolidation * Greater linkages with sister wealth management companies by regional market than within HGI internationally > In Australia, AFS accounts for 64% of AMP
Slide 11: Risk reduction in UKLS
Risk reduction in UKLS e Derivative strategy provided protection for policyholders and shareholders but: > potentially expensive > — short term » requires extensive ongoing management AMP reluctant to invest more capital because highly skewed nature of shareholder exposure* » Upside shared 90/10 wit
Slide 12: Financial impacts of changes
Financial impacts of changes Writedowns associated with risk reduction initiatives: » reducing equity exposure in with-profits funds, leading to writeoff of contingent loans to London Life and National Provident Life £300 million (A$800 million) >» provisioning for potential future losses arising fr
Slide 13: Implementing the strategic restructuring
implementing the strategic restructuring « Established separate project team to manage process while majority of management and staff focus on business as usual *« Team of external advisers working with project team on all key facets of demerger ¢« Implementing targeted communications plans for cust
Slide 14: Operational update — first quarter 2003
Operational update — first quarter 2003 '=AMP
Slide 15: First quarter operational update: New business flows
First quarter operational update: New business flows New business Agm 1Q03 1Q02 AFS(1) 1,687 2,189 UKCFS 733 859 UKLS(2) 299 776 HGI 5,514 7,257 TOTAL 8,233 11,081 New business flows impacted by weaker equity markets and depressed investor sentiment 1. First quarter historically the weakest in the y
Slide 16: First quarter operational update: Costs
First quarter operational update: Costs (A$m) 1Q03 % change AFS*(1) 155 (16) UKFS@) 193 (35) HGI 145 (6) All BUs have maintained stringent cost control in order to preserve their margins in such difficult markets 1. AFS restructuring efficiencies are on track 2. Inthe UK costs are lower due to lower
Slide 17: First quarter operational update: Operating margins
First quarter operational update: Operating margins P59 8 um, wm am, written eg wr ee See oe BU operating margins A$m 1Q03 2002 year AFS(1) 79 327 UKCFS (2) (17) © 211 UKLS (2) 16 HGI|(3) 31 192 TOTAL 109 730 1. AFS first quarter margins solid despite seasonally lower volumes, low interest rates and
Slide 18: First quarter operational update: RolC
First quarter operational update: RolIC dh - 2 N Ly 1Q03 2002 year AFS(1) 13.1% 13.8% UKCFS (2) -1.8% 6.5% UKLS@) 4.2% HGI(3) 8.8% 10.7% ere us 9 Group NPAT (A$m)(4) 61 (896) AFS Rol C is solid due to effective capital management initiatives Low operating margins in the UK are impacting RolC HGI Rol
Slide 19: Reducing equity risk in UK Life Services
Reducing equity risk in UK Life Services '=AMP
Slide 20: What is involved?
What is involved? spose * We are reinvesting in lower risk portfolios with an increased exposure to global fixed interest securities * These portfolios offer lower volatility, more security and greater protection for policyholders and shareholders > Key driver is paramount need to protect policyhold
Slide 21: Impact of de-risking on Pearl risk profile
impact of de-risking on Pearl risk profile Historic asset mix 7.5% 8.8% 12% 50% equities, 15% property no derivative protection Example asset mix - 5% 6.0% 3.7% 1% 5% equities, 10% property equity exposure ¢ Equities either sold or derivative protection in place for residual holdings « Lower risk pr
Slide 22: Impact of de-risking on cashflow
impact of de-risking on cashflow * Reduced capital required on a risk based capital basis - less risk will require less capital as general principle * Capital releases will be proportionate to the business run off - from 2005/6 we expect to release capital plus operating margins and investment incom
Slide 23: Impact of strategic restructuring on UK embedded value
impact of strategic restructuring on UK embedded value 2500 + 1979 28 2000 4 grey atm ok, 163. 30 1545 OES § 1500 4 4000 4 _ 500 + 04 - 4 g > = - 'g 2 ry > 3 > > § au g = x5 8 .& 2 § a so E g ° * es 5 g 2 o > A o 5 g 1 « 38 wn o£ < & z go § z e 4 &% "2 3 8 25 % & 5 é <§ 8 8 F 5 * 8 3 & a 2 a 2 23
Slide 24: Impact of restructuring on UK embedded value
Impact of restructuring on UK embedded value Shareholder funds 482 482 L Extreme economic conditions eg Japan Extreme regulatory impacts snarenolesr interest in 666 "322 Major mortality improvements Sustained FTSE falls (UL business) Value of 0:100 profit margins 71 Sustained very low interest rates
Slide 25: Creation of two new regionally focused businesses
Creation of two new regionally focused businesses '=AMP
Slide 26: 'New' AMP
‘New’ AMP y e mmm Peter Willcox Andrew Mohi « Australian Financial Services (Australia, NZ & India) « HGi Australia and New Zealand Listed on ASX * Gordian and Cobalt (under review) * Strong linkages between its asset gathering and asset management arms * Ready to capitalise on significant growth op
Slide 27: 'New' Henderson
‘New’ Henderson epee A UK wealth management business, with a disciplined run-off Life business focused on cost management and future capital releases * Henderson UK (incl Nth America) * UK Life Services _ Roger Yates * UKCFS & Virgin Money (under review) : Listed on ASX; future listing in UK 3 Pat H
Slide 28: Indicative proforma financial and valuation metrics
Indicative proforma financial and valuation metrics AgSm AUM 71,000 Total shareholder capital resources (1) 4,500 External debt/Hybrids 3,000 AFS embedded value 5,700 Operating margin (2) (4) 470 NPAT (2) (3) (4) 430 ROE 29% RolC 13% Targeted dividend payout ratio 60% NOTE: Information based on 31 M
Slide 29: Indicative proforma financial and valuation metrics
Indicative proforma financial and valuation metrics ‘New’ Henderson A$m AUM 164,000 Total shareholder capital resources 5,300 UKLS embedded value 4,300 Operating margin (1) 140 NPAT (14) (2) 270 ROE (3) 5% RolC (3) 5% NOTE: information based on 31 March 2003 unaudited management information after im
Slide 30: Demerger benefits for the two companies
Demerger benefits for the two companies e Simpler, more transparent corporate structures > With different business focuses, risk profiles, customer bases and business strategies Strong independent Boards and management focused on their regional markets e Expands investment options available to share
Slide 31: Capital implications of strategic initiatives
Capital implications of strategic initiatives ¢ Equity from capital raising and asset sales used to retire debt > Level of external debt reduced > All debt between de-merged entities repaid ¢ ‘New’ Henderson will be appropriately capitalised, with minimal external debt ¢ ‘New’ AMP strongly capitalis
Slide 32: Debt levels will decrease
Debt levels will decrease 4 fee woody e pb iy ee Pea Ler os thes puomen thant vey gna Barn Bw is includes new equity capital from raising . # 5s AS 0.7 1.7 49 5 : sama 0-2 _ DebtiHybrid Debt FX Debt/Hybrid Internal debt Ordinary Bank & BDebt/Hybrid Debt/Hybrid asatDec repayment movement asatMar to b
Slide 33: Demerger mechanics
Demerger mechanics Substantial analysis and advice undertaken to determine appropriate structure and implementation steps >» Commercial and strategic rationale > Legal, accounting and tax » External financings and internal cross-ownership holdings » No major roadblocks identified Documentation for s
Slide 34: Indicative timetable for demerger
Indicative timetable for demerger e 1 May 2003 Initial announcement and capital raising e September — October 2003 | * Announcement of separation details e November 2003 ¢« Shareholder / court / regulatory approvals e December 2003 * Separation effected 34
Slide 35: Capital raising
Capital raising =AMP,
Slide 36: Additional capital required to facilitate demerger
Additional capital required to facilitate demerger ey ies epee * The A$1.5b equity raising has been structured to: >» eliminate the financial inter-dependencies between the Australian and UK businesses and reduce the level of external debt > establish the Australian based business on a standalone ba
Slide 37: Capital raising
Capital raising Institutional ° pricing Share Purchase ° Plan Number of . placement shares Dividend ° Reinvestment Plan A fully underwritten raising comprising: » A$1.0 billion institutional placement » A$500 million Share Purchase Plan Bookbuild range of A$4.50-A$6.50 per share Offer to AMP’s 960,0
Slide 38: Indicative timetable for capital raising May 2003
Indicative timetable for capital raising 1 May 2003 2 May 2003 9 May 2003 5 May 2003 21 May - 13 June Trading halt Investor presentation Books open Books close Allocations, communications to institutions DVP settlement of institutional offer DRP settlement at lower of placement price or April DRP pr
Slide 39: Questions
Questions =AMP,
Slide 40: Appendix
Appendix =AMP,
Slide 41: Standalone invested capital — December 2002
Standalone invested capital —- 31 December 2002 ASm Net tangible assets Intangibles Total capital Australian Financial Services 3,140 495 3,635 AMP Life Statutory funds 3,010 3,010 AMP Life other 130 495 625 UK Financial Services 6,878 1,060 7,938 Pear! 5,021 62 5,083 London Life 1,196 1,196 UKFS ot
Slide 42: Standalone invested capital — December 2002
Standalone invested capital —- 31 December 2002 A$ million Net tangible Intangibles capita Shareholder equity 5,779 2,754 8,533 Hybrid equity 1,141 1,141 Tier 1 6,920 2,754 9,674 Income securities 1,240 1,240 Subordinated debt 840 840 Tier 2 2,080 ~ 2,080 Total regulatory capital (Tier 1 + Tier 2) 9
Slide 43: Standalone invested capital — March 2003
Standalone invested capital — 31 March 2003 A$ million Net tangible Intangibles Total capital assets Shareholder equity §,503 2,560 8,063 Hybrid equity 1,150 1,150 Tier 1 6,653 2,560 9,213 Income securities 1,240 1,240 Subordinated debt 768 768 Tier 2 2,008 _ 2,008 Total regulatory capital (Tier 1 +
Slide 44: Reconciliation of total shareholder capital resources
Reconciliation of total shareholder capital resources ‘New’ intercompany A$m New’ AMP Henderson elimination Total 31/12/2002 13,462 Profit 61 Debt repayment (90) Foreign currency movement (739) 31/03/2003 12,694 Allocation to ‘New’ AMP and ‘New 5,432 7,930 (668) 12,694 Henderson Write-offs - (2,630)
Slide 45: 'New' AMP invested capital — proforma
‘New’ AMP invested capital — proforma Agm Net tangible Intangibles Total capital ‘New’ AMP AFS ~ AMP Life Statutory Funds 3,052 3,052 ~ AMP Life other 110 486 596 HGI 182 168 350 AMP Banking 562 562 Discontinued businesses 687 687 Estimated asset sales (932) (932) Corporate office 185 185 Total AMP
Slide 46: 'New' Henderson invested capital — proforma
‘New’ Henderson invested capital — proforma A$m Net tangible Intangibles Total capital ‘New’ Henderson UKFS ~ Pearl 3,505 3,505 - London Life 707 707 - UKFS other 806 806 HGI 255 940 1,195 Virgin Money 347 347 Corporate office (153)* (153)* Subtotal §,467 940 6,407 Inter business unit holdings (1,10
Slide 47: Caution regarding forward-looking information
Caution regarding forward-looking information « Certain statements contained in this presentation may constitute "forward-looking statements" or statements about “future matters" for the purposes of section 728(2) of the Corporations Act 2001 (Cth) and/or “forward- looking statements" within the mea
Slide 48: Caution regarding financial information
Caution regarding financial information The prospective financial information contained in this presentation necessarily is based upon a number of estimates and assumptions that, while presented with numerical specificity and considered reasonable by AMP, are inherently subject to significant busine