Slide 1: Annual Results 2002
Slide 2: Outline
Outline Group review Business unit review Capital Current issues Our focus
Slide 3: 2002 — the year that was
2002 — the year that was Global markets depressed » FTSE 100 down 25% in 2002 and 47% since 2000 peak » S&P 500 down 23% in year and 46% since 2000 peak » ASX 200 down 12% and 18% since 2000 peak Faltering investor confidence reflecting sustained bear market Sluggish global economic recovery Ongoing
Slide 4: 2002 — the year that was at AMP
2002 — the year that was at AMP Regulatory capital management concerns in the UK CEO and senior management changes Successful hybrid equity issue Strategic review of Group and restructuring of UK Financial Services Substantial balance sheet write-downs Board changes including new Chairman-elect Weak
Slide 5: Summary of strategic review outcomes
Summary of strategic review outcomes AMP UK Financial Services » Separation into two clear businesses - mature & contemporary » Closure of DSF and Household Advisor channels* » Expected cost saves from 2001 levels increased from £100m by end 2003 to £160m in full year 2003 Australian Financial Servi
Slide 6: Financial performance
Financial performance Australian Financial Se 334 UK Financial Services 211 Henderson Global Investors 192 AMP Banking (7) Total BU operating margins 730 Discontinuing businesses 38 Corporate Office expenses (79) Total operating margins 689 Underlying investment income 437 Interest expense on corpor
Slide 7: AMP Group results
AMP Group results AMP's underlying profit is down 26% as a result of margin reductions in all businesses in a tough market for wealth management companies Substantial adjustments to carrying values to better reflect the market environment have resulted in a bottom line loss Australian Financial Serv
Slide 8: Key results drivers
Key results drivers Controllable costs Write-offs & restructuring costs (1,571)
Slide 9: Key results
Key results Underlying profit contribution Earnings per share (underlying) Dividend per share
Slide 10: Business unit review
Slide 11: UK Financial Services results
UK Financial Services results Operating margins under pressure in difficult market, down 36% Sales down 21% as FTSE falls depress investor sentiment and direct sales force wound back, now closed Cost reduction programme on track, delivering £68m in FYO2 Embedded value down 31% (@ 5% discount margin)
Slide 12: UK Financial Services — operating margins
UK Financial Services — operating margins Market ServCo Ampileliii One-off items FY02 movements Operating operating margins margins
Slide 13: UK Financial Services
UK Financial Services New business index
Slide 14: UK Financial Services — embedded value
UK Financial Services — embedded value @ 5% discount margin 169 FY01 Expected FY02new_ Investment Other FY02 before Transfersin FY02 after return business and bond transfers transfers yields
Slide 15: Australian Financial Services results
Australian Financial Services results Operating margins held up relatively well in tough market, down 9% Sales down 11% as investor flows contract but comparative market position remains strong Controllable costs down 8% and restructuring efficiencies on track Value of new business up 8% after resta
Slide 16: Australian Financial Services — operating margins
Australian Financial Services — operating margins FYO1 Experience Market New Capital FYO2 movement movement business initiative operating margins
Slide 17: Australian Financial Services
Australian Financial Services New business index A$9,368m A$10,538m Total contemporary net cashflows A$2,609m
Slide 18: AFS — value of new business
AFS —- value of new business @ 3% discount margin (23) Investment Other FY01 restated Volumeand Unit costs and and bond mix product yields changes
Slide 19: AFS — embedded value
AFS — embedded value @ 3% discount margin 549 (683) (203) 6705 (991) 6614 Expected Investment Expenses FY02 new. Other FY02 before Transfers: FY02 after return and bond business transfers ‘out transfers. yields
Slide 20: Henderson Global Investors results
Henderson Global Investors results Operating margins relatively stable despite market conditions, down 8% Assets under management down 13% in very tough markets New business flows impacted by poor investor sentiment Controllable costs down 6% Return on invested capital relatively steady on 10.7%
Slide 21: Henderson Global Investors — operating margins
Henderson Global Investors — operating margins FY01 Market External Internal Average Expenses FY02 operating movement cashflows cashflows margin operating margin margin
Slide 22: Henderson Global Investors
Henderson Global Investors Assets under management A$255.6bn A$292.4bn
Slide 23: Henderson Global Investors - AUM
Henderson Global Investors - AUM at External SaleofUK | Shortterm _ Life funds Market FX funds (net Private cash (net movement movement cashflows) Client mandate cashflows) business
Slide 24: Capital
Slide 25: Capital — changes to reporting
Capital — changes to reporting Capital reported has moved to a gross basis which makes it easier to reconcile capital in the EV with capital invested and regulatory capital required This approach recognises capital in the UK which supports the regulatory position but is an investment in another BU T
Slide 26: Invested capital
Invested capital Australian Financial Services AMP Life Statutory funds AMP Life other UK Financial Services Pearl London Life UKFS other Henderson Global investors AMP. Banking Virgin Money Discontinuing businesses Corporate Office inter business unit hoidings (1,992) (1,992) Total shareholder capi
Slide 27: Capital management
Capital management Non-core asset sale program is progressing to plan UKFS regulatory capital management is minimising need for injections of new capital AFS will continue to supply capital in 2003 HG] will have negligible need for capital for organic growth in 2003 Dividend reinvestment plan has be
Slide 28: Current issues
Slide 29: Current issues - UK Life & Contemporary Financial Services
Current issues - UK Life & Contemporary Financial Services UK mature book is an underperforming asset — significant capital invested but earnings are poor Regulatory capital position being tightly managed Challenge is to extract real value from mature book for shareholders over medium to longer term
Slide 30: Current issues - UK regulatory capital
Current issues - UK regulatory capital All UK life entities met FSA Required Minimum Margins (RMM) at year end and on best estimates currently Initiatives now in place support shareholder goal to avoid the need to invest additional capital even if FTSE falls to 3000 or lower Derivative overlays, act
Slide 31: Current issues - UK earnings
Current issues - UK earnings Past earnings, excluding one-off items, were based on: » bonus rates when FTSE was at much higher levels » with-profits fund supporting operating costs Collapse in FTSE and planned closure of with-profits fund to new business will reduce these sources of earnings Cost ov
Slide 32: Current issues - UK earnings
Current issues - UK earnings * Initial guidance for 2003 indicated lower margins than 2002 « Point estimate no longer appropriate tn light of: » lower FTSE (4700 assumption no longer realistic) » lower equity backing ratio (in response to lower FTSE) » end 2002 actuarial review « Major uncertainties
Slide 33: Current issues - UK value
Current issues - UK value Embedded value assumptions have been verified by auditors EV is now largely comprised of shareholders’ net assets in various statutory funds and legal entities EV will grow, other things equal, at the risk discount rate Management challenge is to run business, control risks
Slide 34: Current issues: UK value
Current issues: UK value EV risk profile is manageable Shareholder funds Extreme economic conditions eg Japan Extreme regulatory impacts Shareholder interest in 0:100 funds Major mortality improvements Sustained FISE falls Value of profit margins : : Sustained very low interest rates Pacific fund Se
Slide 35: Current issues - UK strategy
Current issues - UK strategy Ongoing refinement of strategy but decision to split businesses to focus on key drivers validated by current market conditions UK Life Services UK Contemporary Financial Services * Focus on management of * Focus on » Balance sheet » |FA wholesale » Costs » EBC / Corporat
Slide 36: Current issues - AFS and Henderson
Current issues - AFS and Henderson * AFS and HGI are great businesses with proven track records, powerful brands and impressive RolC results, notwithstanding the toughest market conditions in over a generation « While both remain sensitive to market forces, they are well positioned for strong value
Slide 37: Our focus
Slide 38: Short term goals
Short term goals Do the basics really well Pursue operational excellence Reduce portfolio risks and protect shareholder capital Focus on core businesses - best advice and products for customers Realise value from and exit non-core businesses Invest only in those businesses delivering required financ
Slide 39: Longer term goals
Longer term goals Grow AMP's leading position in the Australian wealth management market Reduce AMP's capital commitment in the UK by releasing capital from UK Life Services while simultaneously taking other action to increase its RolC Develop a wealth management business in the UK, focused on inves
Slide 40: Conclusion
Conclusion AFS and Henderson are doing well in testing market conditions We have taken effective action to protect shareholder capital in the UK We are managing current issues tightly and focusing on offering better advice and products to customers We are not expecting better markets in the short te
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