Slide 1: 2008 full year results
For personal use only 2008 full year results Craig Dunn Chief Executive Officer Paul Leaming Chief Financial Officer 19 February 2009
Slide 2: Executive summary
Executive summary Sound result in tough market underscores resilience of For personal use only AMP’s business ¾ Underlying profit of A$810m, with good profit growth in non- AUM businesses ¾ Controllable cost growth kept to 1% ¾ Contemporary wealth management net cashflows over A$2b ¾ Capital resou
Slide 3: Outline
Outline Group overview For personal use only Business line review Financial overview Outlook and strategy Summary 3
Slide 4: Key performance measures
Key performance measures Underlying return on equity increased 1.0 percentage For personal use only points to 38.9% Total operating earnings of A$737m, down 4% Cost ratio up to 41.3% from 39.7% in FY 07 Growth measures: ¾ Net cashflows in AMP Financial Services of A$1.4b, down from A$2.9b in
Slide 5: Overview – 2008 full year profit summary
Overview – 2008 full year profit summary A$m FY 08 FY 07 % change For personal use only AFS Contemporary Wealth Management 266 306 -13% AFS Contemporary Wealth Protection 154 119 +29% AFS Mature 161 190 -15% AFS New Zealand 56 48 +17% AMP Capital Investors 136 150 -9% BU operating earnings 773 813 -
Slide 6: Overview – assets under management
Overview – assets under management For personal use only 140 129 121 120 18.5 104 18.9 1.8 105 100 2.3 90 18.3 16.2 1.5 3.1 80 18.9 3.4 60 108.8 100.2 82.3 87.1 40 67.3 20 A$b 0 FY 04 FY 05 FY 06 FY 07 FY 08 Open business Group Closed business AFS Mature business only. With sale of Cobalt/Gordian(CG
Slide 7: Overview – group cost performance
Overview – group cost performance 900 871 879 For personal use only 812 800 782 780 94bps 81bps 700 45.8% 75bps 72bps 68bps 600 41.7% 39.6% 41.3% 39.7% 500 400 FY 04 FY 05 FY 06 FY 07 FY 08 Controllable costs Cost to income ratio Controllable costs to AUM All prior period numbers have been restated
Slide 8: Capital management
Capital management Approach to capital management based on priority to preserve For personal use only capital in volatile market and maintain balance sheet strength Proactive management of both capital and funding requirements have enhanced AMP’s financial strength, despite ongoing volatility ¾
Slide 9: Business line review
For personal use only Business line review 9
Slide 10: AMP Financial Services – FY highlights
AMP Financial Services – FY 08 highlights Diversified business delivered solid results in difficult For personal use only environment, with operating earnings of A$637m, down 4% on FY 07, despite 19% fall in AUM Contemporary Wealth Management’s operating earnings down 13% to A$266m reflecting im
Slide 11: AFS overview – FY cashflows
AFS overview – FY 08 cashflows Resilient business model and strong mandated super For personal use only position drove relative outperformance in cashflows, despite fall in member contributions Total net cashflows of A$1.4b compared with A$2.9b in FY 07 ¾ Retail superannuation and pensions/annui
Slide 12: AFS overview – FY cashflows
AFS overview – FY 08 cashflows Planner channels reflected investor reticence but still had positive For personal use only cashflows ¾ AMP Financial Planning net cashflows of A$863m compared to A$2b in FY 07 ¾ Hillross net cashflows of A$56m compared to A$664m in FY 07 Persistency¹ strengthened a
Slide 13: AFS – cost performance
AFS – cost performance For personal use only 600 560 546 553 533 535 500 100bps 87bps 42.8% 400 76bps 75bps 69bps 300 38.5% 35.2% 35.4% 200 34.2% 100 0 FY 04 FY 05 FY 06 FY 07 FY 08 Controllable costs Cost to income ratio Controllable costs to AUM Planner related variable costs previously included i
Slide 14: AFS Australian contemporary wealth management
AFS Australian contemporary wealth management Contemporary For personal use only Change wealth management FY 08 FY 07 Operating earnings A$266m A$306m - 13% Controllable costs1 A$354m A$352m1 + 1% Cost to income ratio1 46.5% 42.7%1 + 3.8 percentage points Net cashflows A$2,077m A$4,086m - 49% Operat
Slide 15: AFS Australian contemporary wealth protection
AFS Australian contemporary wealth protection Contemporary For personal use only wealth protection Change FY 08 FY 07 Profit margins A$135m A$115m + 17% Experience profits A$19m A$4m + A$15m Operating earnings A$154m A$119m + 29% Operating earnings / API1 23.9% 20.7% + 3.2 percentage points Controll
Slide 16: AFS Australian mature
AFS Australian mature For personal use only Mature Change FY 08 FY 07 Operating earnings A$161m A$190m - 15% Controllable costs A$64m A$64m Steady Controllable costs/AUM1 37bps 34bps + 3 basis points Net cashflows (A$1,036m) (A$1,433m) + 28% Persistency 89.7% 87.0% + 2.7 percentage points AUM (pre-c
Slide 17: AFS New Zealand
AFS New Zealand New Zealand Change For personal use only FY 08 FY 07 Profit margins A$50m A$47m + 6% Experience profits A$6m A$1m + A$5m Operating earnings A$56m A$48m + 17% Controllable costs A$64m A$64m steady Cost to income ratio 41.4% 44.3% - 2.9 percentage points Individual risk API¹ A$112m A$1
Slide 18: AMP Capital Investors – FY highlights
AMP Capital Investors – FY 08 highlights Solid performance with operating earnings down 9% on FY 07 to A$136m For personal use only ¾ Total management fees increased 3% to A$387m from A$375m, reflecting a change in product mix and growth in non-AUM sourced income ¾ Performance and transaction fees
Slide 19: AMPCI overview – FY key financial results
AMPCI overview – FY 08 key financial results For personal use only AMPCI Change FY 08 FY 07 Operating earnings A$136m A$150m - 9% Internal management fees A$176m A$170m + 4% External management fees A$211m A$205m + 3% Total performance & 1 A$86m A$94m - 9% transaction fees Controllable costs A$268m
Slide 20: AMPCI – drivers of cashflows
AMPCI – drivers of cashflows For personal use only 120 1.4 0.1 110 111.1 (0.2) (0.4) (0.5) (0.1) (1.6) 100 (18.0) 91.8 90 80 External Internal A$b 70 AUM at Australian Asian NZ market Australian AMP Australian NZ market Investment AUM at 31 31 Dec 07 market distribution flows contemporary Group run-
Slide 21: AMPCI – volumes and profit margins
AMPCI – volumes and profit margins For personal use only 120 13.6 13.4 11.7 41.5 100 10.8 39.2 9.7 35.7 80 28.8 23.6 60 51.0 56.0 62.1 69.0 62.4 40 20 $Ab 0 FY 04 FY 05 FY 06 FY 07 FY 08 Average external AUM Average internal AUM Operating earnings after tax to average AUM (bps) 21
Slide 22: AMPCI fund quartile performance
AMPCI fund quartile performance For personal use only Australian Australian Australian Balanced Direct Property Equities Fixed Interest Growth Return Ranking Return Ranking Return Ranking Return Ranking 5 years 12.57 Q1 9.21 Q2 6.83 Q1 5.9 Q1 3 years 12.82 Q2 -1.35 Q2 6.72 Q1 - 1.05 Q1 1 year 0.92 Q
Slide 23: AMPCI – performance against benchmarks
AMPCI – performance against benchmarks 63% of AUM met or exceeded benchmark over five years For personal use only 40% over three years and 17% over 12 months to 31 December 08 AMPCI managed* Multi-manager 97% 98% 94% 88% Target 73% 75% 69% 61% 53% 53% 51% 43% 32% 27% 29% 22% 21% 15% 6% 4% 3% 2% 0% 0
Slide 24: AMPCI – performance fee breakdown
AMPCI – performance fee breakdown For personal use only Performance fees by Performance fees by asset class benchmark v absolute return Property Equities 25% Absolute 27% 33% Private equity Infrastructure 16% Relative 32% 67% Note: Based on FY 08 performance fees 24
Slide 25: AMPCI – cost performance
AMPCI – cost performance For personal use only 300 268 257 250 61.7% 57.8% 56.3% 223 53.1% 56.0% 198 200 184 150 26.4bps 24.7bps 23.3bps 23.3bps 22.8bps 100 50 A$m 0 FY 04 FY 05 FY 06 FY 07 FY 08 Controllable costs Cost to income ratio Controllable costs to average AUM – basis points* *Based on aver
Slide 26: Financial overview
For personal use only Financial overview Paul Leaming Chief Financial Officer 26
Slide 27: Financial overview – key points on P&L
Financial overview – key points on P&L Interest expense on Group A$m FY 08 FY 07 % debt – includes cost of holding additional senior For personal use only change debt for 6 months Total operating earnings 737 770 -4% Underlying investment income 140 158 -11% Investment income market adjustment –
Slide 28: Financial overview – capital movements 2H
Financial overview – capital movements 2H 08 A$m Capital resources AMP Life For personal use only AMP Statutory Group Funds As at 30 June 2008 1,162 1,473 2H 08 statutory profits 212 214 Mismatch items - (69) Dividend (net of DRP) - (365) Capital raising - 559 Movements in intangibles - 104 Subordin
Slide 29: Financial overview – capital movements 2H
Financial overview – capital movements 2H 08 A$m AMP Life AMP For personal use only Minimum regulatory capital requirements Statutory Group Funds As at 30 June 2008 521 808 1 AMP Life impact of investment markets 328 328 Tactical equities and bonds protection (206) (206) Asset mix changes (116) (116
Slide 30: Financial overview – capital sensitivity
Financial overview – capital sensitivity These sensitivities are a point in time view of the impact of movements in equity markets, bond yields and property values on the 31 December 2008 capital position AMP’s dynamic capital management framework includes market-related trigger points at which
Slide 31: Financial overview – capital management strategy
Financial overview – capital management For personal use only strategy AMP remains strongly capitalised, with A$898m in surplus capital above MRR, reflecting disciplined and dynamic capital management approach Capital management strategy aims to deliver: ¾ strong balance sheet in a challenging m
Slide 32: Financial overview – dividend
Financial overview – dividend Final dividend of 16cps, franked to 85%, takes FY 08 dividend For personal use only to 38cps¹ – a payout ratio of 89% of underlying profit. Dividend decision driven by: ¾ current cash earnings ¾ expected future underlying profits (1-2 years) ¾ preservation of capita
Slide 33: Financial overview – franking
Financial overview – franking Sufficient franking credits to frank final dividend to For personal use only 85% Tax payable in 2H 08 significantly down on prior periods due to impact of markets Supply of franking credits reduced as a result of interim dividend being greater than earnings 85%
Slide 34: Financial overview – shareholder debt profile
Financial overview – shareholder debt profile Repayment (years) 31 Dec 2008 31 Dec 2007 For personal use only A$m A$m 0-1 443 190 1-2 230 267 2-5 748 629 5-10 - - 10+ 83 83 Group gearing remains low at 14% on an S&P basis, while underlying interest cover is high at 10.9 times Program of refinanc
Slide 35: Financial overview – summary
Financial overview – summary Proactive management of capital resources has For personal use only strengthened AMP’s capital position despite continuing market turbulence Significant flexibility remains for management to take action to preserve capital against further market downturn Future div
Slide 36: Outlook & strategy
For personal use only Outlook & strategy Craig Dunn Chief Executive Officer 36
Slide 37: Market outlook – short term
Market outlook – short term Continued market volatility through 2009 For personal use only ¾ Full consequences of credit crunch still working way through economy Subdued investor sentiment ¾ Flight to safety and quality ¾ ‘Deleveraging’ of households ¾ Returns favouring liquid investors Rapidl
Slide 38: Short-term priorities
Short-term priorities Prudently managing costs, liquidity and capital to protect our For personal use only financial position in the short term Ongoing focus on risk management, as risks heightened in volatile and uncertain environment Acting on opportunities to sustain and improve revenues in
Slide 39: Outlook – costs
Outlook – costs Total controllable costs moderated in 2H 08 (down For personal use only 3% on 2H 07), reflecting actions to reduce cost base, including lower staff numbers AFS costs expected to be around 3% lower in FY 09 on FY 08, as continued investment in growth initiatives is offset by cost
Slide 40: Market outlook – medium to long term
Market outlook – medium to long term Robust growth outlook for wealth management For personal use only sectors in Australia, New Zealand and selected Asian markets, underpinned by: ¾ Ageing demographics ¾ Bi-partisan party support for mandatory superannuation regime in Australia – super now tax fr
Slide 41: Outlook – growth goal
Outlook – growth goal Over-arching goal to deliver top quartile TSR For personal use only performance to shareholders ¾ Aim to be in top 25% of the top 50 listed Australian industrials in terms of total shareholder returns over every five-year cycle ¾ Strong alignment between shareholder goal and
Slide 42: Strategic response
Strategic response Continuing to invest today in improving distribution and For personal use only enhancing products and services to drive strong value growth over the longer term by: 1. Growing planner capacity and broadening distribution 2. Expanding to Asia through AMP Capital Investors 3. Growin
Slide 43: 1. Growing planner capacity and broadening distribution
1. Growing planner capacity and broadening For personal use only distribution Goal: Strengthen core planner franchise, while building new channels to reach more customers in high-value segments by: increasing planner numbers and improving their productivity in the short term ¾ Planner numbers up by
Slide 44: 2. Expanding to Asia through AMP Capital Investors
2. Expanding to Asia through AMP Capital Investors For personal use only Goal: Establish AMPCI as strong competitor in select investment capabilities in targeted Asian funds management markets by: expanding Asian distribution channels and alliances to market existing Australian and global products i
Slide 45: 3. Growing customers in high-value segments
3. Growing customers in high-value segments For personal use only Goal: Attract new customers and develop stronger relationships with existing customers in high-value segments with new offers based on customer needs by: developing and rolling out improved product and service offerings, and extending
Slide 46: 4. Reshaping AMP Capital Investors into a high value-add investment manager
4. Reshaping AMP Capital Investors into a high value-add investment manager For personal use only Goal: Drive margin growth in higher value business and market segments, by delivering superior value to clients by: refreshing investment platforms and research capabilities in short term ¾ Continued in
Slide 47: 5. Building our capacity for profitable growth
5. Building our capacity for profitable growth For personal use only Goal: Provide a strong platform to support business growth by: continuing to invest in people, technology and brand ¾ Purpose-built programs (eg Sustainable Leadership Program in AFS and Investment Leadership Initiative in AMPCI) t
Slide 48: Summary
Summary Sound FY 08 results in testing environment demonstrates For personal use only fundamental resilience of AMP’s business model, planner base and brand Managing business tightly through short term volatility while investing to set business up for stronger growth over the medium to longer te
Slide 49: Appendices
For personal use only Appendices 49
Slide 50: Further information about…
Further information about… Topic Chart For personal use only AMP’s earnings by business line 51 AFS cashflows by channel and product line 52, 53 AMP Banking ¾ Business and funding model 54 ¾ Business profile 55 Non-listed asset valuations 56 - 58 AMP fixed interest portfolio – shareholder
Slide 51: AMP's earnings by business line
AMP’s earnings by business line For personal use only AFS Contemporary Wealth Management AMP Capital Investors operating AFS Mature operating earnings operating earnings earnings 150 190 190 306 136 266 115 244 92 172 187 171 73 121 161 A$m A$m A$m FY 04 FY 05 FY 06 FY 07 FY 08 FY 04 FY 05 FY 06 FY
Slide 52: For personal use only
For personal use only -200 300 800 1,300 1,800 2,300 0 500 1,000 1,500 2,000 2,500 3,000 3,500 Q4 02 Q1 03 Q4 02 Q1 03 (A$m) Q2 03 Q3 03 Q2 03 Q4 03 Q3 03 Q1 04 Q4 03 Q1 04 Q2 04 Corporate Super Q2 04 Q3 04 Q3 04 Q4 04 Q4 04 Q1 05 Q1 05 Q2 05 Q2 05 Corporate Super – exc. mandate wins Q3 05 Q3 05 Q4
Slide 53: For personal use only
For personal use only 2,000 3,000 2,500 3,500 1,000 1,500 500 0 0 500 -2,000 -1,500 -1,000 1,000 1,500 -500 Q4 02 Q4 02 Q1 03 Q1 03 Q2 03 (A$m) Q2 03 Q3 03 Q3 03 Q4 03 Q4 03 Q1 04 Corporate Super Q1 04 Q2 04 Q2 04 Q3 04 Q3 04 Q4 04 2 Australia only, excludes New Zealand. Q4 04 Q1 05 Corporate Super
Slide 54: AMP Banking – business and funding model
AMP Banking – business and funding model Branchless Australian bank offering residential mortgages, deposits and For personal use only white-labeled credit cards ¾ Direct and third-party distribution, including AMP Financial Planning and mortgage brokers Operating earnings of A$21m ($A10m at FY
Slide 55: AMP Banking – business profile
AMP Banking – business profile Deposit mix Credit quality For personal use only 1.20% 90+ days past due 1.00% 2007 2008 14% 9% 21% 0.80% Cash Management 10% Business Saver 13% 3% 0.60% Investment Accounts 46% 4% Transaction Accounts Savings Accounts 7% 0.40% Term Deposits 22% 16% 0% Super Deposits 0
Slide 56: Non-listed asset valuations
Non-listed asset valuations Asset type Portfolio Valuation approach in current Outcome size market For personal use only Valuation cycle twice a year for major High quality core property properties portfolio Property A$18.1b Independent external valuers use a range Overall the gross values o
Slide 57: Unlisted property portfolio mix
Unlisted property portfolio mix For personal use only Total portfolio AMP Life portfolio A$18.1b A$8b Other Other 18% 7% Office/Commercial Office/Commercial 34% 35% Industrial Retail Retail Industrial 7% 52% 40% 7% Apart from the shareholder’s 20% interest in AMP Life (SF1), a fall in property value
Slide 58: Non-listed asset valuations
Non-listed asset valuations Asset type Portfolio Valuation approach in current Outcome For personal use only size market Valuations prepared every six months Approx 37% fall in value of Most common valuation method is multiple of private equity portfolio as at 31 Private equity A$1.2b sustaina
Slide 59: Immaterial shareholder exposure to these assets
Immaterial shareholder exposure to these assets For personal use only AMP fixed AMP SF1 SF1 Other interest portfolio shareholder fund Annuities 20%1 ($m) Fixed 535 526 2,599 2,478 2,047 1,966 interest portfolio US Alt A 3 1 - - - 4 All underlying issues in monoline portfolio are Australian or New Ze
Slide 60: Legacy book – impact of markets
Legacy book – impact of markets Amount of AMP’s AUM comprised of non-cash based capital For personal use only guaranteed products has reduced significantly ¾ At 31 December 2008, customer AUM A$15b Australia and A$1.6b New Zealand (excluding capital and tax reserves) Assets are managed by AMP Ca
Slide 61: Comparison of gross returns with gross crediting rate
Comparison of gross returns with gross For personal use only crediting rate Equities versus bonds versus crediting rate 61
Slide 62: Shareholder funds portfolio – how invested
Shareholder funds portfolio – how invested For personal use only Dec 2008 Dec 2007 Cash 57% 35% Fixed Interest 21% 23% Equities1 11% 29% Property 11% 13% Key changes in FY 08 Previously, the investment risk in the shareholder funds was managed by reference to the probability of loss over a one-yea
Slide 63: Financial overview – dividends and capital returns
Financial overview – dividends and capital For personal use only returns A$5.7b in dividends and capital returns distributed to AMP shareholders over past five years 46 40 2 40 32 2 27 22 21 16 18 40 40 14 40 19 22 22 13 14 Cents 2004 2005 2006 2007 2008 per share 15% franked - interim 75% franked 7