Amp Limited · ASX:AMP
Amp — Non-Deal Roadshow (March 2007)
48 slides from Amp's roadshow presentation, Mar 6, 2007
Slide 1: ASX Announcement: Investor Roadshow Materials
ASX Announcement 6 March 2007 Manager Manager Company Announcements Office Market Information Services Section Australian Stock Exchange New Zealand Stock Exchange Level 4, 20 Bridge Street Level 2, NZX Centre, 11 Cable Street Sydney NSW 2000 Wellington New Zealand Announcement No: 10/07 Investor Ro
Slide 2: AMP — Investor discussion pack
AMP — Investor discussion pack Andrew Mohl — Chief Executive Officer Paul Leaming = Chief Financial Officer Jill Craig Director, Investor Relations March 2007
Slide 3: Outline
Outline » AMP business model * Market dynamics « Group performance » Business Unit performance « Capital management # Qutlook
Slide 4: AMP business model
AMP business model
Slide 5: AMP today — simple, scaleable model in a high growth industry
AMP today — simple, scaleable model in a high growth industry focused on operational excellence « Australasian wealth management group » Integrated business model # High growth industry « Highly scaleable business » Low cost manufacturing platform # Reducing capital intensity # Focusing on operation
Slide 6: Key drivers and enablers of AMP business model
Key drivers and enablers of AMP business model Six drivers Products & Platforms idly growing AM Lee)
Slide 7: Model generates margins across the industry value chain
Model generates margins across the industry value chain Distribution — Products & Asset Dealer groups / planners platforms management Pricing - typical industry range for balanced growth fund AMP retail platform with AMPCI investment without AMPC! investment Non-AMP retail platform Third party retai
Slide 8: Model driving strong earnings from contemporary business
Model driving strong earnings from contemporary business ASm 2003 2004 2005 2006 @ Cobalt/Gordian and AFS Mature AMP Capital investors, AFS Contemporary (businesses in run-off) Weaith Management, AFS Contemporary Wealth Protection, AFS New Zealand
Slide 9: Investment income a declining proportion of overall operating earnings
Investment income a declining proportion of overall operating earnings Ag$m 800 700 600 500 400 300 200 100 0 344 462 647 502 752 FY 02 FY 03 Ei Total operating earnings FY 04 FY 05 @ Underlying investment income FY 06
Slide 10: Powerful distribution engine at heart of business model
Powerful distribution engine at heart of business model (~ AMP Financial Planning | Institutionally branded) planner Hillross, Arrive, Magnify Planner distribution NY Corporate Superannuation
Slide 11: Comparative advantage of AMP in planner distribution
Comparative advantage of AMP in planner distribution — scale, quality and tenure Number of Australian financial planners Adviser turnover — June 2004 to June 2005 June 2006 1800 AMPFP turnover 14% e004 11553 Dealer groups surveyed ‘?) 1400 4,234 Range 4% to 47% 1200 1,108 1,028 . : Upper quartile 23
Slide 12: Market dynamics
Market dynamics
Slide 13: Legislative changes highly supportive of superannuation
Legislative changes highly supportive of superannuation 2 Superannuation is the flagship product in financial services sector = Successive governments over two decades have shaped superannuation as the preferred vehicle for retirement savings « Major reforms during the past two years have cemented t
Slide 14: Robust growth outlook in all key segments of superannuation industry
Robust growth outlook in all key segments of superannuation industry Superannuation asset projections (AUM) ($biflion) 700 4 SMSF - CAGR: 12.2% 600 4 we oo Reball ~ CAGR: 10.8% 500 4 Industry funds - CAGR: 12.8% 400 4 ; 5 i Post retirement- CAGR: 18.4% 300 4 200 4 100 4 2005 2006 2007 2008 2009 2010
Slide 15: Australian private pension market predicted to triple
Australian private pension market predicted to triple in 10 years and exceed all of Asia 2004 Total US$1,452 billion 2015 Total US$3,744 billion Other countries Australia 17% 36.3% South Korea 2.2% Hong Kong 2.7% Singapore 47% Japan 52.4% Other countries 5.8% Australia 51.0% US$1,908.7b South Korea
Slide 16: Group performance
Group performance
Slide 17: Highlights of 2006 FY results
Highlights of 2006 FY results =» Key performance indicators » Underlying return on equity up 6 percentage points to 31.0% > Operating earnings up 16% to A$752m > Cost ratio down 1.6 percentage points to 39.4% > AFS value of new business up 17% to A$364m' >» AFS embedded value up 27% to $7.7b' before
Slide 18: AUM and cashflows growth remains robust
AUM and cashflows growth remains robust Assets under management # Group up 17% to A$122b « AMPCI up 16% to A$106b # AFS up 15% to A$76b Net cashflows « AFS up 53% to A$3.5b « AMPCI external up 9% to A$2.4b Risk premium income * Australian individual risk up 9% to A$429m
Slide 19: Group cost ratios at new lows
Group cost ratios at new lows 900 854 60 5F 832 _ aia 120 50 = 100 40 #80 30 = 60 20 s 40 10 == 20 0% | O bps FY 04* FY 05* FY 06 Controllable cosis stn Cost to income ratio =m Cost to AUM ratio * Some minor restatements to reflect a change in the definition of controllable costs
Slide 20: Underlying RoE above 30%
Underlying RoE above 30% 35 FY 03 FY 04 FY 05 @=» Underlying return on equity FY 06
Slide 21: Goal to double the value of an investment in AMP
Goal to double the value of an investment in AMP from mid 2005 to mid 2009 progressing well H a 55% change in 18 months ‘ bs o ‘ie ca 17.9 4 e =i i ‘o “it i 13.5 " ts a 11.6 * ‘it 4 ‘i i % ‘o ‘ 4 it = + Sd st ‘o it 5 7 ie i ‘o a i A$b Opening value - Opening value - Dividends Capital return- Changei
Slide 22: Business Unit performance
Business Unit performance
Slide 23: AMP Financial Services (AFS) — cost efficiency improving
AMP Financial Services (AFS) — cost efficiency improving 600 572 50 120 7 100 25 de 60 0% 0 bps FY 03° FY 04* FY 05* FY 06 # Controllable costs = Cost to income ratio “Cost to AUM ratio *Some minor restatements to reflect a change in the definition of controllable costs
Slide 24: AFS — drivers of cashflows
AFS — drivers of cashflows Highly rated products Strong fund performance elit exible Lifetime Super ih i iii iin nici Minin hin hin ith: i Strong brand oy 2006 —ee— TT
Slide 25: AFS net cashflows by major channel
AFS net cashflows by major channel on rolling 12 month basis ech INE) Excludes cashflows from CCC, 3PD, GID and other
Slide 26: AFS net cashflows by wealth management product line
AFS net cashflows by wealth management product line on rolling 12 month basis (A$m) cnoncnonnionigegiani a sraanytariured retail produ Le custravia only, excludes New Zealand.
Slide 27: AFS contemporary wealth management — scaleable, high growth, high return
AFS contemporary wealth management — a scaleable, high growth, high return business Contemporary wealth management FY 06 FY 05 Operating earnings A$244m A$187m +30% Controllable costs A$359m A$357m +1% Cost to income ratio 48.0% 54.0% -6 percentage points Net cashflows A$4,453m A$3,473m +28% Persist
Slide 28: AFS contemporary wealth management — significant operational leverage
AFS contemporary wealth management — significant operational leverage 400 360 350 306 250 200 150 100 50 ASm 04 1H 05 2H 05 1H 06 2H 06 Bi Revenue fess variable costs Controllable costs
Slide 29: AFS contemporary wealth protection — solid growth, high return
AFS contemporary wealth protection — a solid growth, high return business Gontemporary wealth protection FY06 =| FY05 Operating earnings A$121m i A$107m +13% Operating earnings / API 22.6% H 22.3% +0.3 percentage points Controllable costs AS65m A$6im +7% Cost to income ratio 22.5% 23.9% -1.4 percent
Slide 30: AFS mature — slowly declining, large scale, outstanding return
AFS mature — a slowly declining, large scale, outstanding return business Mature Change FYo6 | FY0S Operating earnings AS190m A$171m +11% Controllable costs A$6Om A$66m 9% Controllable costs/AUM' 32bps 36bps -4 basis points Net cashflows (A$1,136m) (A$1,279m) +44% Persistency 88.1% 87.3% +0.8 percen
Slide 31: AFS New Zealand — life risk-driven, high return business
AFS New Zealand — a life risk-driven, high return business New Zealand Change FY 06 FY 05 Operating earnings NZ$60m NZ$54m +12%!' Controllable costs NZ$69m NZ$64m +13% Cost to income ratio 41.4% 41.1% Steady Net cashflows NZ$14m (NZ$49m) +NZ$65m Risk annual premium income NZ$104m NZ$90m +16% Lapse r
Slide 32: AFS — strong growth in value metrics in FY06
AFS — strong growth in value metrics in FY 06 Return on Embedded Value | lee see VNB growth in year % ASm % FY 06 27.2% 364 +17% FY 05° 29.5% 310 +8% FY 04 25.4% 286 +20% FY 03 13.2% 239 -5% 1 Traditional basis, @ 3% discount margin. 2 FYO5 value measures restated due to methodology and modelling ch
Slide 33: AMP Capital Investors — high growth, outstanding return business
AMP Capital Investors (AMPCIl) — a high growth, outstanding return business AMPCI Change FY 06 FY 05 Operating earnings A$115m A$92m +25% Fee income A$385m A$328m 417% Controllable costs A$223m A$198m 413% Cost to income ratio 56.0% 57.8% -1.8 percentage points External net cashflows A$2.4b A$2.2b +
Slide 34: AMPCI — volumes and margins expanding
AMPCI — volumes and margins expanding 100 97.8 7 14 90 12 80 70 10 60 Lg 50 40 6 30 nA 20 2 10 Basis A$b 0 FO points FY 03*4 FY 044 FY 05 FY 06 Average AUM in period sm Operating earnings after tax - basis points * FY 03 excludes Listed Property Trusts AUM and profit earnings as these businesses wer
Slide 35: AMPCI — out-performance against benchmarks
AMPCI — out-performance against benchmarks across most Australian asset classes Weighted AUM % at or above benchmark i Dec-06 Dec-05 99% 89% 91% 91% Listed assets infrastructure Private equity Property Future Directions Total funds AUM atDec’06 A$62.7b A$2.4b A$1.8b A$13.1b A$15.0b A$95.0b* * Austra
Slide 36: Cobalt/Gordian — surplus capital now being released
Cobalt/Gordian — surplus capital now being released Ag$m FY 03 FY 04 FY 05 FY 06 i Minimum capital requirement Surplus capital held in licensed insurers } Loans to Group office “ Excludes capital held in non-licensed entities and capital held as deferred tax assets; A$65m at Dec 2006.
Slide 37: Capital management
Capital management
Slide 38: Regulatory capital resources at end 2006
Regulatory capital resources at end 2006 Loan from Total AMP. AMP. Cobalt / AMP. Financial Capital Cobalt / Gordian to AMP Life Banking Services investors Gordian Group office Total ital ote" capita 3,689 4,611 182 4,793 290 617 4,473 (484) resources Intangibles (641) (450) (27) (477) (93) - (71) .
Slide 39: AMP Financial Services — profit and capital releases
AMP Financial Services — profit and capital releases AFS AFS underlying Investment Additional Cash transfer operating investment income market transfers”) from AFS © earnings") income’)? adjustment((?) 2000 322 258 243 176 999 2001 311 234 (94) (271} 180 2002 272 221 (258) 736 974 2003 368 169 42 46
Slide 40: AMP's financial strength metrics
AMP’s financial strength metrics 46 oud §31 Dec 2006* 30 June 2006 44 y 31 Dec 2005 42 30 June 2005 40 31 Dec 2003 31 Dec 2004 Underlying interest cover 30 June 2004 44 30 June 2003 60% 50% 40% 30% 20% 10% 0% S&P gearing S&P indicative A range * S&P changed its methodology during 2H 06 to inchide 50
Slide 41: Capital initiatives
Capital initiatives Capital management strategy since 2004 has driven: « A$600m reduction in Group debt « Dividends per share up from 27c to 40c and increase in payout ratio to 85% « A$2.25b in capital returns to shareholders, including proposed third capital return of A$750m in June 2007 » Proposed
Slide 42: Capital initiatives
Capital initiatives Capital management strategy going forward: « AMP’s surplus capital position expected to be within its target range post proposed FY 07 capital return # With 85% payout ratio policy, future capital initiatives likely to be less frequent and/or significantly smaller in scale « Init
Slide 43: Dividends and capital returns since 2003
Dividends and capital returns since 2003 2003 2004 2005 2006 15% franked - interim 75% franked 75% franked 85% franked 85% franked - final Binterim dividend Final dividend Capital return
Slide 44: Underlying EPS — impact of capital returns
Underlying EPS — impact of capital returns Cents per share 60 2003 2004 2005 2006 EPS after adding back foregone income from capital returns —Z EPS as reported
Slide 45: Outlook
Outlook
Slide 46: Strategic plan to double value over years to 2011
Strategic plan to double value over 5 years to 2011 (grow value by 15% pa) — cornerstone assumptions « Equity markets growing around 6% pa, net of dividends « Realising scale benefits from volume and market growth > 10%-plus pa growth in retirement savings and post retirement sectors! projected over
Slide 47: Strategy remains operational excellence
Strategy remains operational excellence: “to run the business better than ever before” « Key strategic initiatives to enhance and strengthen the core of AMP’s business model: >» Increasing planner productivity by leveraging process excellence skills and enhancing technology platform > Growing planne
Slide 48: AMP today — simple, scaleable model in a high growth industry
AMP today — simple, scaleable model in a high growth industry focused on operational excellence « Australasian wealth management group » Integrated business model # High growth industry « Highly scaleable business » Low cost manufacturing platform # Reducing capital intensity # Focusing on operation